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Call Buying Heats Up on This Duo of Apple Inc. (AAPL) Suppliers

Cirrus Logic, Inc. and TriQuint Semiconductor saw accelerated call volume yesterday

by 6/4/2014 10:12 AM
Stocks quoted in this article:

With Apple Inc.'s (NASDAQ:AAPL) Worldwide Developers Conference in the spotlight this week, option traders are targeting the iPhone maker's suppliers. Specifically, Cirrus Logic, Inc. (NASDAQ:CRUS) and TriQuint Semiconductor (NASDAQ:TQNT) saw accelerated call activity on Tuesday.

CRUS saw more than 4,400 calls cross the tape -- three times its average daily call volume. For comparison, just over 900 puts changed hands. The equity's June 23 call garnered the most attention, with nearly 900 contracts exchanged. Eighty-one percent of the calls traded on the ask side, implied volatility (IV) spiked 3.9 percentage points, and open interest at the strike increased overnight -- hinting at buy-to-open activity.

By purchasing the calls at a volume-weighted average price (VWAP) of $0.44, the buyers stand to profit if CRUS is sitting north of $23.44 (strike plus VWAP) at the close on Friday, June 20. In fact, profit potential is theoretically unlimited north of breakeven, while risk is capped at the initial premium paid for the calls.

Now is a good time for option buyers to gamble on CRUS. The security's Schaeffer's Volatility Index (SVI) of 31% sits just 1 percentage point from an annual low, suggesting the stock's front-month contracts are inexpensive, from a historical standpoint. However, Cirrus Logic, Inc. (NASDAQ:CRUS) shares are currently staring up at familiar resistance in the $23.50 region, which has contained the equity's rally attempts in 2014.

TQNT calls traded at nearly twice the average pace yesterday, though volume on an absolute basis wasn't much, at only 510 contracts. Most of the action consisted of apparent buy-to-open activity at the August 17 call, amid hopes for TQNT to muscle into record-high territory and top $17 by the close on Friday, Aug. 15, when the options expire.

From a technical standpoint, TQNT has advanced more than 88% in 2014, and was last seen flirting with $15.70. In February, TriQuint Semiconductor (NASDAQ:TQNT) announced that it agreed to a merger of equals with RF Micro Devices, Inc. (NASDAQ:RFMD).

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