Options Trading News

June 12, 2013  Wed 3:16 AM CT

Semiconductor companies have been strong, and some investors see limited downside in the industry.

optionMONSTER's market scanners detected unusual put selling in two chip makers yesterday. The strategy makes money from stocks holding their ground or climbing, rendering the contracts worthless by expiration. (See our Education section)

The volume hit in Maxim Integrated Products first, with 1,770 July 26 puts fetching $0.35. The strike is at roughly the same level where MXIM peaked in mid-2012 and bounced later in the year, which could be leading chart watchers to expect it to hold as support.

Less than 10 minutes later, some 2,500 August 29 calls were bought for $0.70, which is straightforwardly bullish. It isn't clear whether the activity was related, as traders sometimes combine short puts with long calls to mimic owning shares. MXIM fell 1.22 percent to $27.43.

About halfway through the afternoon, option activity popped in Xilinx. This time more than 8,000 June 39 puts traded for $0.44 to $0.47. The $39 level is roughly the same price where XLNX peaked in February and March, so by selling puts at that strike the investor is betting that resistance will become support. XLNX fell 3 percent to $39.16.

Total option volume was more than quadruple average amounts in both stocks yesterday. In addition to the put selling in MXIM and XLNX, traders also continued to position for upside in Intel. (See related story)
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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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