By Jud Pyle, CFA, chief investment strategist for the Options News Network

Looking at the May 17.5 calls in NetApp ( NTAP) we find that they have traded more than 5,000 times so far today vs. current open interest of 411. We also find that the May 20 calls have traded more than 7,000 times vs. an open interest of 1,462 and the May 12 puts 10,000 times vs. an open interest of 119.

What is interesting about this option activity is that it was all part of a bullish spread and it gives one picture of a way to take advantage of potential upside in NTAP.

NTAP reached a 52-week low on Nov. 12 of $10.39. Now today, with the stock having rallied back up to around $15.70, an investor purchased the May 17.5 and 20 strike calls 5,000 times each, while simultaneously selling 10,000 of the May 12.5 puts.

The investor paid about 60 cents for the 17.5 calls, 25 cents for the 20 calls, and collected 30 cents to sell the 12.5 puts. So net in total, he or she paid out $550,000 in premium. If NTAP is above $18.60 at May expiration, the investor will break even.

From time to time we have seen unusual option activity in NTAP, particularly when takeover rumors heat up. For example, the open interest in the April 12.5 and 15 calls is more than 20,000 each. The 15 calls traded last week, and the 12.5 calls traded the last week of February and the first week of March.

In the past, Barron's has suggested that buyers could include the likes of IBM ( IBM), Cisco ( CSCO), or Oracle ( ORCL) with a price ranging from $20 to $25. Today there are no rumors running rampant, but past rumors at least are worth noting.

This bullish activity in NTAP does not mean that investors should run out and buy shares of the stock. But it is at least looking at how one investor is using options to express a seemingly bullish view.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."

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