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Xilinx, Inc. (NASDAQ:XLNX) calls are trading at triple the usual intraday rate this afternoon. By the numbers, about 14,000 calls are on the tape, versus just over 3,000 puts. Against this backdrop, the tech stock's 30-day at-the-money implied volatility has shot 7.6% higher to 22.4%, signaling increased demand for short-term options.
However, the most active strike is the March 41 call, which doesn't expire for another seven-plus months. Nearly 6,000 contracts have changed hands here -- the majority at the ask price, suggesting they were bought. More specifically, with just 142 contracts in open interest at the strike, it's safe to assume bullish bets are being freshly minted -- although a portion of the positions may have been rolled down and out from the January 2015 46-strike call.
By purchasing the in-the-money calls at a volume-weighted average price (VWAP) of $3.14, the speculators are gambling that XLNX will rally past breakeven at $44.14 (strike plus VWAP) by March options expiration. Gains are theoretically unlimited north of here, while the maximum risk on the trade is the initial premium paid, should the shares backpedal and finish below the strike at expiration.
On the charts, Xilinx, Inc. (NASDAQ:XLNX) is 0.6% higher this afternoon to wink at the $41.38 level. However, the stock's year-to-date deficit is still close to 10%, following last week's massive bear gap, which took place after the company's disappointing turn in the earnings confessional prompted a round of price-target cuts.