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Calls like U.S. Silica before earnings

(Editor's note: The following is an example of notable trading cited on optionMONSTER's InsideOptions Pro service yesterday.)

Traders are betting that U.S. Silica will rally after it reports earnings next week.

optionMONSTER's Heat Seeker system detected heavy buying the March 35 calls yesterday, with nearly 3,700 trading for $0.45 to $0.97. Volume was well above the strike's previous open interest of 1,323 contracts, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased through mid-March no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $35. (See our Education section)

SLCA jumped 6.98 percent to $31.90 yesterday, its best close since late November. The fracking-sand producer has lost more than 40 percent of its value since hitting 52-week highs above $57 in September, but shares are now trying to break out of their recent range. Short interest is estimated at more than 27 percent of the float.

The company is scheduled to announce quarterly results after the market closes next Tuesday, Feb. 24.

Total option volume in the name topped 9,000 contracts yesterday, more than 5 times its daily average for the last month. Overall calls outpaced puts by 2.5 to 1.

Disclosure:
I am long SLCA.

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