After a nasty selloff for much of the week, semiconductor stocks managed to bounce from their lows. And now some traders are taking bets that Qualcomm, one of the biggest chip stocks, will rally sharply within two weeks.
While Qualcomm shares traded lower on Thursday, some traders began making bullish bets in the options market. In fact, call volume outnumbered puts by a 2-to-1 ratio. A call is a bullish wager giving the purchaser the right to buy a stock at a set price on specific date. Puts give its purchasers the right to sell the stock.
In one noteworthy transaction, a trader placed a bullish bet that Qualcomm will rally nearly 5 percent over the coming 14 days. Specifically, the trader bought 5,000 calls with a 70-strike expiring on April 10 for 22 cents.
That means the trader wagered $110,000 that Qualcomm will close at $70.22 or almost 5 percent higher in the next two weeks.
According to Dan Nathan, founder of RiskReversal.com, this trade may miss Qualcomm's scheduled earnings release on April 22 but it may have been done to take advantage of any accelerated buybacks with prices now at lower levels. Three weeks ago, the company announced it will be buying $10 billion worth of shares over the next 12 months and said it raised its dividend by 14 percent.