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With RF Micro Devices, Inc. (NASDAQ:RFMD) lingering in decade-high territory, call buying has been a popular strategy in the stock's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), RFMD's 50-day call/put volume ratio of 18.15 ranks in the 78th percentile of its annual range, meaning long calls have been initiated over long puts at an accelerated clip in recent months.
This trend toward calls was witnessed in yesterday's session, where calls traded at four times the expected amount. Nearly all of the day's call volume centered on two options -- the January 2015 11 and 12 strikes -- and diving deeper reveals one speculator upped the ante on her longer-term bullish outlook.
Specifically, 16,000 January 2015 11-strike calls -- that were initially purchased to open on July 21, with the stock trading near $10.80 -- were sold to close for $1.75 apiece. The trader then used these funds to buy (to open) a block of 22,000 January 2015 12-strike calls for $1.25 each. In other words, she rolled up her position, with the expectation that RFMD will extend its lead above $12 over the next five months.
On the charts, RFMD has had a standout year, with the shares up more than 133% to trade at $12.03. As noted, the equity is hovering near levels not seen since January 2004, and just yesterday, tagged a fresh 10-year peak of $12.10. The stock came within a chip-shot of notching a new technical milestone this morning, when it hit the $12.08 mark right out of the gate.
Despite this strong technical showing, short interest accounts for 16.4% of the security's available float. In light of this, a portion of the recent call buying activity -- particularly at out-of-the-money strikes -- could be at the hands of short sellers hedging against any additional upside for RF Micro Devices, Inc. (NASDAQ:RFMD).