Traders betting big on Applied Materials

The big bets on Applied Materials continue.

On Tuesday, shares of the chipmaker were down just 0.3 percent. But options in Applied Materials saw enormous activity. By the early afternoon, some 170,000 calls traded—five times its average daily volume. In fact, the stock's options trailed only Apple and Facebook in volume for the day.

In one transaction that caught the eye of many traders, an investor bet over $1 million that Applied Materials would rally 25 percent in the next three months. Specifically, the buyer purchased a call spread, buying 25,000 June 27-strike calls and selling an equal amount of the June 30-strike calls at a price of 46 cents each. Since each contract controls 100 shares, the total notional value of the transaction was around $1.15 million.

"That's a trade that could potentially be worth more than $6 million if Applied Materials got to that $30 upper strike price by June expiration," said CNBC contributor Mike Khouw.

A call is a bullish wager giving its purchaser the right to buy a stock at a specific price on a given date.

Applied Materials
Source: Applied Sciences | Facebook
Applied Materials

Read MoreHow a trader made over $1 million in two days

This wouldn't be the first time large bets were placed on Applied Materials. A little over a month ago, a trader risked $1.74 million on calls in the stock and saw an incredible $1.4 million in profit the following day after the shares popped up 5 percent.

According to Khouw, the most recent buy of Applied Materials calls was likely done with an eye on the calendar.

"This would give it enough time to capture their general annual meeting [scheduled for April 2] as well as their earnings results, which are going to be published on May 12," Khouw said.

Last month Applied Materials lowered guidance for the current quarter, saying revenues would be "flat to up a couple of points." Sales have remained between $2.26 billion and $2.37 billion for each of the last four quarters.

As of Tuesday's close, Applied Material's shares were down 4 percent this year while the PHLX semiconductor index was up 4.5 percent.

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  • Melissa Lee

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

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