OptionsHouse

Options Trading News

September 26, 2013  Thu 5:16 AM CT

AMAT: SEE CHART GET CHAIN FIND STRATEGIES
Applied Materials rose again yesterday, and option traders were all over it.

Pacific Crest raised its price target on the stock to $21, based on the advantages from its Tokyo Electron buyout. The stock was already edging higher, and then the October 18 calls started flying. Some sizable blocks lit up optionMONSTER's Heat Seeker scanners less than half an hour after the opening bell with prints of $0.19, $0.20, and $0.23.

Such long calls lock in the price where stock can be purchased, letting investors benefit from a rally for much less money than buying shares directly. They stand to generate some nice leverage even if the stock climbs only a small amount.

And that's exactly what happened yesterday, as AMAT edged higher a couple percent while those October 18s doubled to $0.42 just hours later. More than 16,600 contracts changed hands in the session, about 8 times the previous open interest at the strike. (See our Education section)

AMAT rose 2.26 percent to close at $17.84.

Our trade scanners also detected the purchase of almost 10,000 January 18 calls for $0.81 and $0.82 later in the morning, so there is definitely some major positioning underway in the semiconductor-equipment maker as it prepares to get even bigger in its industry.

Overall calls outpaced puts by 46,000 to 25,000 yesterday, and total option activity was 8 times greater than average.

Disclosure: I own AMAT calls.

(A version of this post appeared on InsideOptions Pro yesterday.)
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 »