Traders are playing for a breakout in Qualcomm, which reports
earnings next week.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of about 11,000 December 72.50 calls for $0.92 and the sale of an
equal number of December 65 puts for $0.73. Volume surpassed open
interest at both strikes, indicating that new positions were
initiated in the semiconductor company.
locks in the price where a stock can be purchased, while
lets the investor collect money if shares hold above designated
levels. Combining the two is highly bullish, letting the trader
play for a rally at minimal cost but carry risk if the stock falls
too far. (See our
Today's strategy cost just $0.19 per contract, or $209,000. That
amount initially controls about 528,000 shares, with leverage
increasing to the upside or downside. The position will dwindle in
value if no move occurs.
Using the combination trade prevents the investor from missing a
rally, while also programming a buy order at $65 if it drops. (See
our Education section for more on how to manage trades more
effectively with options.)
QCOM is up 0.29 percent to $69.69 in afternoon trading, continuing
to consolidate at its highest level since the 2000 tech bubble. The
company's next quarterly results come out next Wednesday, Nov. 6,
after the closing bell. The last report beat expectations and
management raised guidance.
More than 57,000 contracts have changed hands in the name so far
today, almost triple its average daily amount for the last month.
Overall calls are outpacing puts by nearly 2.5 to 1.
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