Options Trading News

November 1, 2012  Thu 3:47 AM CT

The bulls like Spreadtrum Communications, which has steadily climbed despite weakness in China and the broader semiconductor industry.

optionMONSTER's Heat Seeker monitoring program detected the purchase of almost 1,900 November 23 SPRD calls for $1.20 to $1.40. Volume was more than twice open interest at the strike, indicating that a new position was initiated.

Those long calls lock in a $23 entry price over the next 2-1/2 weeks, which covers the company's next earnings report on Nov. 8. They can generate some big leverage in the event of a rally but also become worthless if it doesn't move. (See our Education section)

Shares of the Shanghai-based company, the only major chip maker on mainland China, rose 1.54 percent to $23.05 yesterday. The stock is up 27 percent in the last three months, compared with a 4 percent decline for the Philadelphia Semiconductor Index in the same period. It has climbed steadily since early 2009, though results have been mixed in recent quarters.

Total option volume was 6 times greater than average in the name on Wednesday, according to the Heat Seeker. Calls outnumbered puts by a bullish 10-to-1 ratio.
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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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