Options Trading News

November 12, 2013  Tue 4:45 AM CT

Xilinx has been consolidating after a big run, and traders are looking for another stab to the upside.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 1,500 January 47 calls for $0.49 and the sale of an equal number of January 49 calls for $0.16. That translates into a cost of $0.33.

Volume was below open interest at the lower strike, so there are two possible explanations for the activity.

One is that the investor owns shares in the semiconductor company and had previously sold the January 47s as part of a covered-call trade and rolled up to the January 49s. That way the trader stands to earn an additional $2 on the stock.

Alternatively, both halves of the transaction may have been opened, in which case it was a bullish call spread with the potential to earn 506 percent on a move to $49 by expiration. (See our Education section)

XLNX declined 1.23 percent to $44.08 yesterday. The stock shot from $38 to $48 between mid-June and mid-September, and it has been pulling back since. Shares haven't traded above $49 since 2001, so the trader is anticipating prices not seen in more than a decade.

Overall option volume was twice the daily average, with calls accounting for more than two-thirds of the total.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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