OptionsHouse

Options Trading News

October 5, 2011  Wed 9:52 AM CT

SWKS: SEE CHART GET CHAIN FIND STRATEGIES
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.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »