Options Trader Bets Nearly $4M on Texas Instruments Stock

A TXN options trader bet nearly $4 million on the semiconductor stock

Apr 17, 2017 at 3:38 PM
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One option trader placed a huge bet on semiconductor stock Texas Instruments Incorporated (NASDAQ:TXN) ahead of the company's earnings release next week. Specifically, 10,000 July 77.50 calls were bought to open for $3.65 each, according to Trade-Alert, and may have been part of a potential delta hedging strategy, setting the trader back $3.65 million (premium paid * contracts purchased * 100 shares per contract). 

Speaking more generally, TXN options traders have been targeting calls over puts at an unusually fast pace in recent weeks, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The shares have a 10-day call/put volume ratio of 1.01 across these exchanges, which tops 74% of comparable readings from the past year. 

But whether it's calls or puts, it's a great time to buy TXN options. This is based on the stock's Schaeffer's Volatility Index (SVI) of 14%, which ranks just 16 percentage points from a 12-month low. In other words, premium on near-term options is unusually inexpensive at the moment -- even with the company's annual shareholders meeting slated for this Thursday, and earnings on next Tuesday evening's docket.

Looking to the charts, Texas Instruments Incorporated has been a long-term outperformer, up 33% year-over-year at $78.42, with the shares touching a nearly 17-year high of $82.44 back on March 17. At the same time, TXN stock is on pace to close below its 50-day moving average for a third straight session, after spending four months above this trendline.

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