With company earnings on the books, one large-scale AOL, Inc. (NYSE:AOL - 33.48) speculator is looking onward and upward -- literally. The shares are trading solidly higher after posting a healthy jump in quarterly earnings, revenue, and advertising sales. In response, overall option volume is much heavier than normal, and two of the most active strikes are the work of one trader rolling an existing short call to a higher strike.

More than 18,000 total calls have changed hands, 12 times typical intraday call volume. (For comparison's sake, just over 5,000 puts have traded, quadrupling what's general expected.) About half of today's call volume is contained at the April 35 and 32 calls, which both saw blocks of 4,500 contracts change hands shortly before noon.

The 32-strike call traded at the ask price of $2.70 per contract, while the 35-strike call crossed at the bid price of $1.17. Based on existing open interest levels (5,435 contracts at the 32 strike and just 153 at the 35 strike), it appears these traders were buying to close the lower-strike calls and selling to open the higher-strike positions. This may be a covered-call play, and the investor is "rolling up" the strike because he does not want to be called away and forced to deliver the shares. It would be a lot of shares, too -- 450,000, as each call sold represents 100 shares.

The focus of the trade now shifts to the 35 strike, which is about 4% above current levels. If AOL stays south of this level through April options expiration, the call seller keeps the premium collected as profit (and holds onto his AOL shares). If the stock threatens to overtake this strike, he can continue to "roll" the position to a higher strike and/or a later-dated month.

Although AOL has been in sideways consolidation mode for the last couple of months, the shares have gained close to 75% in the past 12 months and are up 13% in 2013. Today's 6.5% jump has launched the stock above its 60-day moving average. The shares are also now working at closing a bear gap created on Dec. 3, when the company announced the exit of its chief marketing officer.

Today's move could spook some short sellers and force weaker hands to the exits. Roughly 13.5% of the equity's float is currently sold short, and it would take almost 11 trading days (at the stock's average daily volume) to cover the existing short bets. This provides ample fuel for a short-covering rally, which could help to extend today's uptrend.