Options Trading News

October 5, 2011  Wed 9:52 AM CT

The bulls are back in Skyworks Solutions.

Yesterday, optionMONSTER's Heat Seeker program detected upside call buying in the semiconductor stock. Today, the activity is more complex, with investors selling about 2,000 November 18 puts for $1.75 and buying 3,500 November 18 calls for $2.20. Volume is more than 5 times open interest in both strikes.

The trade will profit from a rally or lose money if SWKS pushes lower. It cost about $420,000 and is a highly leveraged strategy that's similar to owning stock. (See our Education section)

SWKS is up 4.35 percent to $18.95 in morning trading. The company's chips are used in a broad array of industries, but it is especially focused on wireless devices and Apple's iPhone. Its last earnings report on July 21 beat on the top and bottom lines, and management issued bullish guidance.

Nonetheless, the share price has been roughly cut in half since February. It's now back to the same levels where SWKS traded in late 2010 before ripping higher, which could make some chart watchers think it's now attractively valued.

Overall option volume is triple the daily average so far today.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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