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Marvell Technology Group Ltd. (MRVL) Traders Eye a Short-Term Surge

Marvell Technology Group Ltd. calls flew off of the shelves on Friday

by 4/7/2014 10:49 AM
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Marvell Technology Group Ltd. (NASDAQ:MRVL) option traders have favored calls over puts in recent months, per the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.89. Not only does this show that nearly three calls have been bought to open for each put during the past 10 weeks, but the ratio ranks in the 72nd percentile of its annual range. Simply stated, long calls have been initiated over long puts at a faster-than-usual clip.

It was a trend witnessed on Friday, where calls traded at more than nine times the average daily rate, and outpaced puts by a nearly 16-to-1 margin. Short-term traders were out in full force, targeting the May 16, April 17, and weekly 5/9 17-strike calls. The vast majority of the volume at each strike occurred on the ask side, implied volatility jumped at all three strikes, and open interest rose over the weekend. Summing it all up, it seems safe to assume that new bullish bets were initiated.

By purchasing these calls to open, speculators are betting on Marvell Technology Group -- which hit a fresh two-year peak of $16.65 last Tuesday on the back of a well-received court ruling -- to continue its trek higher in the near term. Risk for all sets of call buyers is limited to the initial premium paid, should the stock finish south of the respective strike prices at expiration. Regardless, now is an ideal time to place short-term bets on MRVL at a relative bargain, as evidenced by the equity's Schaeffer's Volatility Index (SVI) of 30%, which ranks lower than 88% of similar readings taken in the past year.

In today's session, Marvell Technology Group Ltd. (NASDAQ:MRVL) has been seen on both sides of breakeven in early trading -- testing recent support atop its 20-day moving average. At last check, though, the stock was flirting with a 0.1% lead to trade at $15.95.


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