Call Buyers Return to Ciena

By David Russell of OptionMonster

 

NEW YORK -- Ciena (CIEN) gapped higher at the end of last week, and traders came back ready to buy upside options on Tuesday.

OptionMonster's tracking programs detected heavy buying in the March 28 calls, starting with a large block for 72 cents. Almost 15,000 of the contracts changed hands in the session, dwarfing the previous open interest of 307 contracts in clearly new positions.

Ciena's stock was up about 2% when the activity hit and ended the session with a 4.08% gain to $26.02. Prices of those calls almost doubled, at one point trading for as much as $1.20.

These long calls lock in the price where a stock can be purchased, letting investors cheaply control a move to the upside. They can also generate significant leverage from a small move, which is exactly what happened Tuesday.

Last week's rally followed a partnership with Ericsson. Ciena's next earnings report is scheduled for March 6.

Total option volume in the networking-technology company Tuesday was eight times greater than average.

Russell has no positions in CIEN.

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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