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Maxim Integrated Products Inc. (NASDAQ:MXIM) was heavily targeted by option players on Tuesday, with calls and puts trading at more than four times and 13 times their respective average daily volumes. By the numbers, the contracts changed hands in near parity, with 3,171 calls and 3,086 puts crossing the tape. The two most active strikes of the day were the August 29 call and the July 26 put, and diving deeper into the data reveals a bullishly slanted view coming from both sets of option traders.
Jumping right in... All of the 2,559 August 29 calls that traded did so at the ask price. Implied volatility ticked higher, and open interest added 2,458 positions overnight, making it safe to assume that a number of these calls were bought to open. By purchasing the out-of-the-money (OTM) calls for a volume-weighted average price (VWAP) of $0.70, speculators will begin to profit with each step north of $29.70 (strike plus VWAP) MXIM takes through the close on Aug. 16. This breakeven mark represents expected upside of 8.4% to the stock's current perch at $27.39.
Meanwhile, of the 1,771 July 26 puts that were exchanged, 100% crossed at the bid price, and open interest soared overnight, confirming sell-to-open activity. Ideally, Maxim Integrated Products Inc. will stay north of the $26 mark through the close on July 19, letting the OTM puts expire worthless, and the traders to pocket the net credit collected, which is also the maximum reward on the play. According to Trade-Alert, the VWAP for the puts was $0.35.
This bullish tendency among option players is nothing new, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the course of the past 50 sessions, traders have bought to open 5,001 calls, compared to 1,758 puts. The resultant call/put volume ratio of 2.84 ranks higher than 70% of similar readings taken in the past year, pointing to a healthier-than-usual appetite for long calls over puts of late.
It's a sentiment that's shared outside of the options pits, too, where the stock maintains seven "strong buy" and four "buy" recommendations, compared to nine "holds," and not a single "sell." Plus, the consensus 12-month price target of $34.16 represents a bold 25% premium to present trading levels.
Looking elsewhere, the equity's technical showing has been weak of late. For starters, the stock has dropped nearly 19% from the five-year high of $33.67 it tagged on March 14. Additionally, Maxim Integrated Products Inc. (NASDAQ:MXIM) has lagged the broader S&P 500 Index (SPX) by north of 19 percentage points throughout the past 60 sessions. More recently, the stock's downward trajectory has been highlighted by its 10-day moving average, which has been ushering MXIM lower since mid-May.
With such high expectations surrounding the low-performing stock, MXIM could be poised to encounter some contrarian-related headwinds down the road. In fact, Barclays, J.P. Morgan, and Susquehanna all downwardly revised their outlook for the equity earlier this week, prompting the stock to deepen its recent slide.