Call buyers like the look of NXP Semi
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program has detected steady buying in the May 25 calls. They initially fetched $1.80, but then premiums fell to $1.15 and $1.20 after the shares retreated. Volume has continued to build throughout the session and surpasses 13,300 contracts. That's greater than previous open interest of 11,694, indicating new activity.
Those holders now have the right to buy NXPI for $25 in the next four weeks no matter how high it might climb during that period. There is potential for significant leverage if the stock rallies, while the amount of money they'll lose in the event of a pullback is limited. (See our Education section for more on how options can be used to manage risk.)
NXPI is up 4.5 percent to $26.93 and is back to its highs of the session. It reported earnings of $0.72 a share yesterday afternoon on revenue of $1.09 billion, better than the $0.49 and $1.07 billion expected by analysts. Previous reports also beat estimates.
The stock peaked above $32 in March and then retreated to the same $25 area where it hit resistance last year. That could be leading some chart watchers to think that it's at an attractive entry point.
There is also bullish activity across the broader semiconductor industry today following strong results from companies like Texas Instruments and ARM Holdings. The Heat Seeker also showed upside trades in SanDisk and Micron Technology.
Overall option volume in NXPI is more than 8 times greater than average so far today, with calls accounting for about 90 percent of the total.