ON Semiconductor snapped back from a 52-week low on Friday, and
traders are confident it's done going down.
About halfway through the morning, optionMONSTER's Heat Seeking
tracking system detected the sale of 3,000 January 2012 5 puts for
$0.70 and the purchase of an equal number of January 2012 7.50
calls for $1, resulting in a cost of $0.30. The same transaction
was repeated in smaller pieces later in the day on a total of 7,000
The strategy, known as a bullish combination, will simulate a
long position in the stock and make money if ONNN pushes higher
over the next 16 months or closes above $7.80 on expiration.
An additional 10,000 January 2012 5 puts were sold on their own
over the course of the session. The transactions are consistent
with a broader pattern we have seen of late where traders write
large blocks of out-of-the money puts to generate income. The
activity was unusual, however, because it involved much longer
dated contracts than has been typical recently.
ONNN ended the session up 3.05 percent at $6.41, after touching
as low as $6.08 within the first hour of trading. The company,
which bills itself as a provider of energy-efficient chips for the
green industry, reported better-than expected earnings and revenue
on Aug. 4. The midpoint of its top-line guidance for the next
quarter was slightly above expectations.
One event that could potentially affect trading is the Citi
Technology Conference in New York on Sept. 9, when CFO Donald
Colvin will make a presentation at 9:10 am eastern time.
Overall options volume in ONNN was 22 times greater than average
(Chart courtesy of tradeMONSTER)
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