by Houghton and Atkeson 05/12/08
During the past 10 months, Aruba Networks (ARUN) would "take ya" to all the wrong places if you were long the stock.
When the company reported its last quarter, investors said "oooh" and dropped the stock from about $8 to $5 in a gap move. This is normally not the type of stock that we attempt to make money with. But, since February, the stock has been putting in a long base and has started to rise.
On Friday and again today, options investors are buying call options at the $7.50 strike in the June (QBRFU), July (QBRGU) and October (QBRJU) expiration months, thousands of times (today alone is generating 10 times normal trading volume), with the stock trading at about $6.70.
Our sentiment is to go long either the options or stock through the end of this week, but to be ready to close the position before May 22 when the company is scheduled to report earnings after market close.
If you would like to take your chances with the upcoming earnings release, it might be best to play the options where you can gain good exposure to the trade but limit the total dollar exposure.
For more fresh options trading ideas from Andrew and Nick, click here.
