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The obscure semiconductor stock traders are betting on

It's been a sweet week for ON Semiconductor. Buoyed by the announcement Monday of a stock repurchase program, the shares have gained 9 percent since Friday. And options traders believe the stock has a lot more room to run in the weeks ahead.

As ON Semiconductor options traded about 12 times their average daily options on Wednesday, the most popular bet was to buy the January 10-strike calls for about 37 cents.

Since a call grants its owner the right to buy a stock for a given price at a given time, this trade will make money if the stock is above the strike price by more than the amount being spent at January expiration—or above $10.37 on Jan. 16.

Read MoreBehind the huge bullish bet on Yum

Analysts are also bullish on the name. Sixty-five percent of analysts have an "overweight" rating on the stock, and the average target price is $10.74, according to FactSet. That compares with just the 31 percent of analysts covering Texas Instruments who have overweight ratings on the semiconductor giant.

Still, Mike Khouw points out that the stock stalled out around the $10 level a few times the past.

"It seems to have had a little bit of trouble getting through that $10 level, so playing it with calls is probably the right way to go here," Khouw said Wednesday on CNBC's "Fast Money."


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  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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