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Option volume on Pixelworks, Inc. (NASDAQ:PXLW) has skyrocketed today, with more than 5,700 contracts changing hands so far -- easily outstripping the stock's average daily volume of 577 calls and puts. With demand soaring for PXLW options, 30-day at-the-money implied volatility has surged 24.1% to 90.4%.
The center of attention this afternoon is the August 10 call, where 1,794 contracts have traded. The majority of these out-of-the-money calls have crossed the tape at the ask price, and today's volume at this strike is outnumbering open interest of 1,569 -- suggesting that options traders are buying new bullish bets on PXLW.
This sudden interest in PXLW options coincides with a big jump for the stock, which is up 16% this afternoon to trade at $8.82. With the company's latest 10-Q filing revealing it has landed none other than Apple Inc. (NASDAQ:AAPL) as a new customer, shares of the semiconductor stock are among the biggest gainers on the Nasdaq today. Earlier in the session, the shares peaked at a seven-year best of $9.19.
Today's breakout is likely attributable, in part, to a short-squeeze rally. Even though Pixelworks, Inc. (NASDAQ:PXLW) boasts an impressive year-to-date gain of more than 80%, bears have sold short a substantial 13.9% of the stock's float. In fact, some of today's call-buying activity could be driven by short sellers, as bullish options can be used to hedge shorted shares against a continued rally.