Traders Look for Rebound in VMware

By Mike Yamamoto of OptionMonster
 
NEW YORK -- Traders are betting that VMware will recover from a steep drop last month.
 
OptionMonster's tracking systems showed that 2,500 June 95 calls were purchased on Friday, most of them priced for $3.60. That was well above the strike's previous open interest of 288 contracts, indicating that this is fresh buying.
 
These long calls lock in the price where the stock can be purchased through mid-June no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $95.
 
VMware rose 1.77% to $93.68 on Friday. The cloud-computing company gapped down from $105 after releasing quarterly results on April 22 and bounced at support around $90 last week.
 
Total option volume in the name was almost twice its daily average for the last month. Overall calls outnumbered puts by almost 4 to 1.
 
Yamamoto has no positions in VMW.

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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