Options Trading News

December 13, 2012  Thu 3:47 AM CT

Chip maker Altera is trying to break out of its recent range, and some traders apparently believe that it will succeed in the next six months.

optionMONSTER's Heat Seeker system detected the purchase of 1,231 June 34 calls yesterday, almost all of them going for $2.65. Open interest in the strike was just 14 contracts at the start of the session, so this is fresh buying.

The long calls are looking for ALTR to gain roughly 11 percent by mid-June 2013. These options could be sold earlier if premiums increase with a rally in the shares before then, but the calls will expire worthless if the stock doesn't rise at least to the $34 strike price. (See our Education section)

ALTR slipped 0.12 percent yesterday to close at $33.04 as it tried to recover from recent losses. Shares of the semiconductor company had gapped higher in July after beating quarterly estimates and raising its dividend but dropped sharply from above $38 to below $30 between mid-September and mid-October. Since then the stock has been trapped between about $30 and $32.50.

Calls outnumbered puts by more than 5 to 1, a reflection of yesterday's bullish sentiment.
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The art of trading

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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