Buying On Semiconductors (ONNN) Jan 7.50 Calls for $0.70

Breakdown: I bought the ONNN January $7.50 Calls for $0.70.

Profitable – I make money on this trade if ONNN closes above $8.20 by January 20, 2012.

Break-even – I break-even on this trade if ONNN closes at $8.20 by January 20, 2012.

Unprofitable – If ONNN closes under $8.20, this trade will be unprofitable. The most I can lose is $0.70 which is the price I paid for the Calls .

The reason I like this trade: Using unusual options activity once again, I saw buyers of the ONNN December 8 Strike Calls for $0.25 on Friday. The market on these calls was $0.10 – $0.25 and the customer paid $0.25 for 8,000 of them. I am purchasing the January 2012 7.50 Calls for $0.70. The stock sold off on the INTC news this morning, but I am hoping for a rally up to $10.00 to $10.50. I think this is a great way to get long ONNN, but define my risk vs reward.  

After a double top formation that completed and confirmed to the downside over the first half of 2011 we have been consolidating in a range of 6.50 – 8.00. Capitulation selling volume appeared in mid / late October and some primary downtrend lines have been broken to the upside, even though we have been still stuck in the 8-6.50 range. Given this size of unusual bullish options activity, it looks like if this stock catches a bid and breaks out of the range, a minimum price target to the upside is an even $10.00. For all the Gartley pattern people out there this macro pattern could also be construed as a Bullish Bat pattern given the Fibonacci harmonics that are present.


Andrew R. Keene