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Option Brief: Roughly 20,000 Atmel Corporation (NASDAQ:ATML) calls are on the tape this afternoon -- a brow-raising 88 times the expected intraday rate. For comparison, just 296 puts have been exchanged. Against this backdrop, the microcontroller issue's 30-day at-the-money implied volatility (IV) has spiked 7.2% to 32.7%, signaling increased demand for short-term contracts.
Garnering the most attention, however, is the slightly longer-term August 10 call, where approximately 16,200 contracts have traded -- more than 10 times the second most active ATML strike. Just 444 contracts reside here, and IV is solidly higher, collectively pointing to freshly initiated bets. What's more, the majority of the total volume at the out-of-the-money strike -- including a sweep of 4,114 contracts, which changed hands right out of the gate -- transpired at the ask price, making it safe to assume the calls were purchased. This buy-to-open theory is confirmed by Trade-Alert, as well as data from the International Securities Exchange (ISE).
By picking up the contracts at the volume-weighted average price (VWAP) of $0.30, the traders expect ATML will rally above $10.30 (strike plus VWAP) by the close on Friday, Aug. 15, when the options expire. This would put the shares in territory not explored since March 2012. The speculators will rack up additional gains with each step higher the underlying is sitting at expiration, but if the stock finishes below the strike, the call buyers risk losing the initial premium paid.
On the charts, Atmel Corporation (NASDAQ:ATML) is up 3% this afternoon to rest at $9.16, bringing its 2014 advance to 17%. The shares also notched a new two-year high of $9.33. However, the stock is still 9.2% below the overhead $10 mark; as such, delta on the aforementioned ATML calls is just 0.34, or 34%.