Options Volume Explodes On QUALCOMM, Inc., Micron Technology, Inc.

Sector tailwinds are boosting semiconductor stocks QUALCOMM, Inc. (NASDAQ:QCOM) and Micron Technology, Inc. (NASDAQ:MU), and options volume is soaring

May 20, 2016 at 1:55 PM
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Semiconductor stocks QUALCOMM, Inc. (NASDAQ:QCOM) and Micron Technology, Inc. (NASDAQ:MU) are rallying today, amid an earnings-induced halo lift from sector peer Applied Materials, Inc. (NASDAQ:AMAT). Today's boost is much needed for both QCOM and MU, and has sparked a rush of activity in the chipmakers' respective options pits.

For instance, QCOM call volume is running at four times the intraday norm, and with more than 46,000 contracts on the tape, is currently ranked in the 96th annual percentile. The most popular option by a mile is the weekly 6/3 55-strike call, thanks to one trader who bought to open an 8,866-contract block for $0.27 each. As such, this trader bet $239,382 (premium paid * number of contracts * 100 shares per contract) on QCOM topping $55 by the close on Friday, June 3, when the options expire. 

Elsewhere, it seems other traders are expecting QCOM to hit this mark even sooner. Specifically, it looks like traders are buying to open the weekly 5/27 55-strike put, betting on the stock to topple this level by next Friday's close. 

Technically, QUALCOMM, Inc. (NASDAQ:QCOM) has been churning in the $50-$53 range since late February. Thanks to today's sector-related pop, though, QCOM is now above $54 for the first time since November, and is on pace to close above its 50-week moving average for the first time since October 2014.

MU options volume is running at five times what's expected for this point in the day. In fact, the 165,426 MU options that have traded arrive in the 98th annual percentile. Calls have the slight edge over puts, with 98,721 calls on the tape, versus 66,705 puts.

Drilling down, it appears as if the majority of the action on both sides is a result of one trader who may be be rolling out his synthetic short position. Specifically, it looks as though someone closed 25,000-contract blocks of the May 13 put and call ahead of tonight's expiration, and simultaneously sold to open 25,000 July 13 calls and bought to open an identical block of July 13 puts.

On the charts, Micron Technology, Inc. (NASDAQ:MU) is up 5.3% this afternoon at $10.61, but is running out of steam near its historically significant 80-day moving average. Looking back, this is a rare day in the sun for the semiconductor stock, as it's lost almost one-fourth of its value year-to-date. This dreadful price action may help explain the bearish activity in the stock's options pits today.

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