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January 22, 2014  Wed 2:45 AM CT

MXIM: SEE CHART GET CHAIN FIND STRATEGIES
A large trader is looking for Maxim Integrated Products to make a sharp move higher or lower.

optionMONSTER's Depth Charge system shows that 10,000 May 30 puts were bought for the ask price of $2.60 yesterday. This is clearly a new position, as open interest in the strike was just 260 contracts before the trade appeared.

Just afterward, a huge block of 620,000 MXIM shares was bought for $28.70. Combined with the puts, this creates a delta-neutral position that is focused on a big move in either direction and/or actual volatility that is greater than that implied by the option price. (See our Education section)

MXIM finished the day at $28.70, up 0.53 percent on the session. The chip maker traded above $31 in late October but has tested support at $27.50 several times in the last six weeks.

Total option volume in the name topped 13,100 contracts yesterday, 9 times its daily average for the last month.
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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.

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