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Quick profits turned in Skyworks

By: optionMONSTER
Posted: 2/21/2014 6:16:00 AM
Referenced Stocks: SWKS

Skyworks hit our scanners early yesterday, and the bulls cleaned up fast.

optionMONSTER's Heat Seeker system detected the purchase of 5,000 March 33 calls for $0.65 in the session's opening minutes. The stock pushed higher and premiums inflated, roughly doubling to $1.25 by the afternoon.

Those contracts continued to build in volume throughout the day, ending the session above 19,500. That was more than 21 times the previous open interest at the strike.

Such long calls lock in the price where investors can buy the semiconductor stock, letting them position for a rally with limited risk. The contracts can also generate significant leverage because of their cheap cost, which is exactly what happened yesterday. (See our Education section)

SWKS gapped up at yesterday's open and finished the session with a gain of 6.39 percent to $33.32, its highest close since early 2011. The stock has been rallying since November and gapped higher following a strong quarterly report last month.

Overall option volume in the name yesterday was 11 times its daily average for the last month, with calls accounting for a bullish 89 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)