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WebMD Pullback Brings Out the Bulls

By David Russell, reporter at OptionMonster

NEW YORK -- WebMD Health (WBMD) has pulled back after a strong earnings report last month, and the bulls are getting long.

OptionMonster's trade scanners detected the purchase of 3,000 September 30 calls for 95 cents to $1.05. Volume was almost triple the previous open interest at the strike, indicating that new money was put to work.

Calls lock in the price where shares can be purchased, letting investors cheaply position for gains and generate leverage from small moves in the underlying stock. For instance, a gain of less than 30% in the shares would more than double the value of those September 30 calls.

WebMD ended the session down 2.89% to $25.18 but is up 76% so far this year. It's back near the same price range where it consolidated in March, which could be leading some traders to believe that the shares are due for a bounce.

Quarterly results May 7 crushed expectations on the top and bottom lines. The online medical-information company also raised full-year guidance as it did a better job monetizing strong traffic.

Total option volume was 14 times greater than average in the session, with calls outnumbering puts by a bullish 58-to-1 ratio.

Russell has no positions in WBMD.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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