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TheStreet Open House

Bulls Tune Into Time Warner

By Mike Yamamoto of OptionMonster

NEW YORK -- Time Warner (TWX) broke out last month, and the bulls are looking for more gains.

OptionMonster's tracking programs showed that more than 9,300 July 70 calls traded Monday, most of them bought for 87 cents to 99 cents. The volume was far above the strike's previous open interest of just 497 contracts, an indication of fresh purchases.

These long calls lock in the price where the stock can be bought through mid-July no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $70.

Time Warner rose 1% to $68.52 on Monday. The media company's stock traded in an increasingly tight range in the first four months of the year, then climbed to a new 52-week high following a strong earnings report in late April, but it has been pulling back in the last week.

Overall option volume in the name Monday was five times its daily average for the last month. Calls accounted for a bullish 78% of the total.

Yamamoto has no positions in TWX.

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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