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CNBC EXPLAINS

Option Traders Still Bullish on This Chip Company

Published: Monday, 12 Oct 2009 | 7:51 AM ET

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By: Mike Yamamoto
Managing Editor, OptionMonster

Synopsys ended last week at its highest closing price in a year, and option traders apparently believe that the chip software company will climb even higher before Christmas.

Synopsys [SNPS Loading... () ] finished Friday's session up 1.64 percent to $23, matching its 52-week intraday high from late September. The stock has gained 65 percent since its low of $13.94 from November 2008.

More than 75 percent of the day's option trading took place at the December 25 strike, where 7,321 calls changed hands in a strong buying pattern for $0.35 to $0.65, according to optionMONSTER's real-time Heat Seeker system. The trading far exceeded open interest of just 233 contracts, indicating the opening of new positions, and dwarfed the average volume of just 9 calls a day for the last month.

The name saw 9,702 calls and puts trade at all strikes Friday, compared with its average daily option volume of just 374 total contracts. Calls outnumbered puts by more than 14 to 1.

For the calls bought Friday to turn a profit, the stock would need to rise between 10 percent and 11.5 percent by the time the options expire on Dec. 18. Synopsys has not scheduled its next earnings report, but several industry conferences will be held before December, including the company's annual forum for vendors and customers on Nov. 5.

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Synopsys Competes With:

Cadence Design Systems [CDNS Loading... () ]