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Vimicro International Corporation (ADR) (NASDAQ:VIMC) is on fire today, up 31% at $8.69 -- and earlier hit a seven-year peak of $9.38 -- after JL Warren Capital said the company could be poised to become a leader in China's video surveillance field. In the stock's options pits, overall volume has soared to 12 times what's typically seen at this point in the day. Short-term contracts are in high demand, per the equity's 30-day at-the-money implied volatility, which has jumped 29% to 128.2% -- in the 96th percentile of its annual range.
The four most active strikes target the equity's $7.50 level; specifically, the September 7.50 call and put, and the October 7.50 call and put, have garnered the most attention. The majority of the action at all four strikes has transpired on the ask side, and volume outstrips open interest -- making it safe to assume new positions are being initiated.
By buying to open the calls, traders expect VIMC to extend its lead past $7.50 through September and October options expiration, while those purchasing the puts are betting on the stock to retreat below this level in the near term. Delta on the front-month call -- which expires at this Friday's close -- is docked at 0.91, versus negative 0.17 for the front-month put. Meanwhile, delta on the back-month call, which expires at the close on Friday, Oct. 17, is 0.74, compared to negative 0.27 for the back-month put.
Longer term, shares of Vimicro International Corporation (ADR) (NASDAQ:VIMC) have risen 344% this year. Against this backdrop, option traders have bought to open 20.96 calls for every put over the past 50 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), and short interest accounts for less than 1% of the stock's available float.