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Bulls Rolling With Ingersoll-Rand

Stocks in this article: IR

By Mike Yamamoto of OptionMonster

NEW YORK -- Ingersoll-Rand (IR) saw upside option action last month, and bullish traders are back for more.

OptionMonster's tracking programs show that a block of 5,101 July 60 calls was sold for $2.66 in volume below previous open interest. At the same time, 10,202 August 65 calls were purchased for $1.18 above open interest in that strike, indicating that it is a new position. This suggests that an existing long position was rolled forward in time to a strike that is $5 higher.

The trader is closing the July calls and opening a position one month later at double the size, while taking some money off the table. The new long calls, which lock in the price where the stock can be bought no matter how far it might fall, are looking for Ingersoll-Rand to close above $65 by mid-August. The contracts can be sold earlier for a profit if the stock rallies before then, but they will expire worthless if shares are below that level.

Ingersoll-Rand rose 0.21% to $62.70 on Friday. The stock has pulled back from an all-time high of $64.11 reached on June 20 but appears to be holding support at its 20-day moving average.

The July 60s were initially purchased for $1.45, as OptionMonster reported at the time on its subscription services. They expire two sessions before the industrial company announces second-quarter results, so adjusting the position will prevent the investor from missing a strong report.

Total option volume in the name was 11 times greater than average in the session, with overall calls outnumbering puts by a bullish 29-to-1 ratio.

Yamamoto has no positions in IR.


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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