Options Trading News

May 8, 2013  Wed 12:06 PM CT

Semiconductors have been coming to life, and big institutional players don't want to be left behind.

optionMONSTER's Heat Seeker monitoring system detected the purchase of some 7,100 June 40 calls on the Market Vectors Semiconductor exchange-traded fund for $0.25 and $0.30. Volume was more than 500 times open interest at the strike, indicating that new money was put to work on the long side.

These long calls lock in the price where shares can be purchased in the fund, whose big holdings include Intel, Taiwan Semiconductor, and Texas Instruments. The contracts stand to generate significant leverage if SMH continues to climb, providing upside exposure at a fraction of the cost. That also limits losses if it drops. (See our Education section for more on how options can be used to manage risk.)

SMH is up 1.16 percent to $38.36 this afternoon. It's up more than 10 percent in the last month as sentiment has improved toward the global economy but lagged the broader market in the preceding year.

Total option volume is 7 times greater than average in the fund so far today, with calls outnumbering puts by 140 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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