Traders Bet on Quick Pop in Aruba


By Mike Yamamoto of OptionMonster

NEW YORK -- Short-term option traders are looking for Aruba Networks (ARUN) to keep rising on newly approved government funding for public wireless services.

More than 6,000 July 17 calls were purchased for 18 cents to 85 cents $0.85 on Friday, according to OptionMonster's tracking systems. The volume was well above the strike's previous open interest of 1,630 contracts, indicating that new positions were established.

These long calls lock in the price where the Wi-Fi provider's stock can be purchased by the end of this week 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 quickly lose value if shares stall or pull back.

Aruba jumped 7.18% to $17.46 on Friday. The move followed a decision by the Federal Communications Commission to approve a $2 billion subsidy for public school and library Wi-Fi networks for the next two years, with the possibility of an annual $1 billion allocation after that.

The stock is now back to the middle of its recent range, making up for the losses it took during the broader-market selloff earlier last week. But shares are still down some 18% in the last three months.

Total option volume in Aruba was just shy of 11,000 on Friday, about 10 times its daily average for the last month. Only 777 of those contracts were puts, an indication of the session's bullish bias.

Yamamoto has no positions in ARUN.

 

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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