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Bulls Tune Into Sirius XM

By David Russell of OptionMonster

NEW YORK -- Liberty Media (LMCA) might not want to buy Sirius XM (SIRI), but investors want to own the satellite-radio stock.

OptionMonster's tracking systems detected the purchase of more than 145,000 SIRI January 4 calls on Friday, most of them priced for 17 cents to 26 cents. The volume was more than double the strike's previous open interest of 68,360 contracts, indicating that new positions were initiated.

These calls lock in the price where investors can buy SIRI stock, letting them cheaply leverage a move higher. The contracts can also generate significant leverage, but they will expire worthless if shares remain below $4 through early next year.

Sirius shares rose 2.08% to $3.44 on Friday after Liberty Media Chairman John Malone abandoned a takeover attempt. The move will let Sirius resume a buyback program in a stock that's near the low end of its recent trading range following a steady slide since October.

Later in the session, traders sold about 35,000 January 3 puts in SIRI for 22 cents to 24 cents, reflecting the belief that downside is limited. As long as the stock stays above $3, they'll keep that premium as profit.

Sirius was the fourth-busiest name in the option market on Friday, trailing only heavyweights Apple, Facebook, and Bank of America. Aggregate option volume in the stock was 23 times greater than average, with calls accounting for more than 80% of the total.

Russell has no positions in SIRI.

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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