As analysts debate the health of the semiconductor sector, at least one trader is apparently confident that chipmaker Analog Devices has room to run higher.
Yesterday's option activity was focused on the November 27.50 strike, where a single block of 2,000 calls was bought for $1.65, according to OptionMonster's real-time tracking systems. The average turnover is only 24 calls per day at the strike, which showed open interest of 378 contracts.
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Analog Devices finished the day up 1.6 percent to $28.02. The stock hit a new 52-week high of $29.71 just on Sept. 10 but then slipped and has been bumping up against resistance around $28.
For the calls purchased yesterday to turn a profit, the stock would need to gain at least 4 percent by the time the options expire on Nov. 20. The company is scheduled to release its next quarterly earnings report on the very next trading day after expiration.
The health of the chip industry remains in general remains an open question. Earlier this month, for example, Analog Devices was one of several chipmakers to receive a lower rating when Broadpoint Amtech downgraded the entire semiconductor sector. Yesterday, however, Goldman Sachs reiterated its 2010 forecast of 13 percent growth in handset units, an area where Analog Devices hopes to expand.
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Mike Yamamoto is an analyst and writer for OptionMonster.