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August 9, 2012  Thu 3:16 AM CT

S: SEE CHART GET CHAIN FIND STRATEGIES
Sprint Nextel has been ripping higher, and the bulls aren't quitting yet.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 11,148 November 5 calls for $0.27 and the sale of roughly the same number of August 4 calls for $0.44. Volume was below open interest in the August options but not the November contracts, which indicates that an existing position was closed and rolled to the higher strike.

The transaction let the investor collect a credit of $0.17 and gave him or her an additional three months of upside exposure. (See our Education section for more on how options can be used to generate leverage and manage trades.)

S rose 6.50 percent to $4.59 yesterday and has almost doubled in the last three months. The wireless carrier's stock fell hard in 2011's market crash and has rebounded only since the spring. The last two earnings reports have beaten expectations, and the option activity has been bullish.

More than 84,000 contracts traded in the session, almost twice the daily average, according to the Heat Seeker. Calls outnumbered puts by about 4 to 1.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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