Bullish trades in Cypress Semi


Cypress Semiconductor is putting in a double bottom around $9.80, and now one big investor is betting on a long-term rally.

CY optionMONSTER's Heat Seeker tracking program detected the sale of 11,895 January 2012 7.50 puts for $0.87 and $0.88, matched against the purchase of an equal number of January 2012 12.50 calls for $1.60. The transaction resulted in a net cost of $0.725 and pushed total options volume in the stock to 16 times greater than average.

CY rose 6.02 percent to $10.57 on Friday after trading as low as $9.73 in the session, slightly below the $9.80 level where it bottomed out at the beginning of last month. The company, whose chips are used in devices ranging from computers to home appliances, reported better-than-expected earnings and revenue on July 22.

The stock rallied briefly on the news but since then has been dragged lower by amid the bigger negative trend in technology and semiconductor shares. On its last earnings call, CY also issued guidance for the third quarter that was above forecasts.

Friday's trade will simulate a long position in the stock, delivering leveraged gains if it pushes above the $13.20 area by expiration. It neither make nor lose money beyond the premium already invested if CY remains between $7.50 and $12.50, but generate additional losses below the bottom of that range.

The activity in was similar to trading at about the same time in ON Semiconductor, which also saw long-term put selling and call buying. Both occurred after chip giant Intel cut its guidance amid weak PC demand and then rebounded from its own 52-week low. The development may have been so inevitable bad news that the market has been gradually pricing into the sector recently, signaling that now the coast is clear for buyers to return.

This morning, the Semiconductor Industry Association said worldwide chip sales rose 1.2 percent in July from June, led by gains in the Americas while Asia was little changed.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

Referenced Stocks: CY , INTC , ONNN , SMH



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