One investor is betting that the tide is turning for Cavium
The maker of networking chips has repeatedly issued
in the last three months amid a slowdown in enterprise spending. It
has nonetheless managed to hold its ground around the same $25-$30
area where it consolidated during 2010.
A large three-way trade lit up the Heat Seeker yesterday,
reflecting a belief Cavium will rally. A block of 3,000 February 33
calls was bought for $2.09 while equal numbers of February 27 puts
and February 37 calls were sold for $0.56 and $0.63 respectively.
Volume was more than 10 times open interest in all three strikes.
The trade cost $0.90 and will earn a maximum profit of 1,011
percent if the stock closes at or above $37 on expiration. It will
also lose money below $27.
CAVM rose 5.33 percent to $33.02 yesterday. While it's been trapped
in a range since the market crashed in August, the stock has
recently been rising steadily and is up more than 20 percent from
its lows in mid-December.
The company made a presentation at the Needham Growth Conference on
Jan. 10 and will probably issue full-year results for 2010 later
this month, although the release date has not yet been announced.
Yesterday's bullish trade pushed overall option volume in the name
to 14 times greater than average.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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