Cavium: Calls Anticipate Big Move

By David Russell

Options activity surged in Cavium Networks (CAVM) Tuesday as traders bet on a big move by the chipmaker.

Volume in the December 20 calls rose to 5,408 against open interest of only 3,236 contracts, according to optionMONSTER's Heat Seeker monitoring system. The calls changed hands for $0.90 to $1.05, with purchases accounting for the bulk of the activity.

CAVM is up 0.3 percent to $16.94 in morning trading and has outpaced the broader Nasdaq by rallying 17 percent in the last month. Tuesday's trade may have been a simple bullish bet that the stock will rally past $21.05 by expiration. Or it may have been an instance of a so-called delta-neutral strategy designed to profit from increased volatility in the name rather than the shares moving in one specific direction.

The company reported a wider-than-expected loss in the first quarter and forecast sales slightly above analysts' forecasts for the period ending in June. CAVM hasn't yet scheduled the release of second-quarter results.

Options volume in the name was more than three times average today, according to Heat Seeker.

(Chart courtesy of tradeMONSTER)

Comments

[PhillyDan:]

Cavium would be ripe for a buyout. I wouldn't discount Broadcom as a serious suitor once they have completed the Emulex buyout.

Jun 30 09:12 PM