Buyers look to power up with Cavium

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Cavium is trading near the bottom of a five-month range, but traders are betting that shares of the networking-chip maker will pop in coming weeks.

About 1,100 January 33 calls were bought for $0.55 and $0.65 on Monday, according to
optionMONSTER's Heat Seeker tracking system. The volume was nearly 3 times higher than the strike's open interest of 384 contracts at the start of the session, so these are fresh purchases.

CAVM rose 1.69 percent to $31.21 on Monday. The stock gapped above $32 from below $28 after the company reported strong second-quarter earnings in early August but has been trading between $30 and $36 since then, wit support at its 200-day moving average.

The long calls bought Monday, which lock in the price where the stock can be purchased, are looking for CAVM to gain more than 7.5 percent by expiration on Jan. 18. The traders could sell these options earlier if their premiums rise with any rally, but the calls will expire worthless if the stock doesn't move. (See our Education section)

The company is scheduled to release fourth-quarter earnings on Jan. 31 after the close. Cavium recently surpassed S&P 500 component Lexmark in market capitalization , which could provide another catalyst for the stock.

Monday's call buying made up the bulk of CAVM's total option volume of 1,418 contracts in the session, which was more than 6.5 times its daily average. Calls outpaced puts by more than 8 to 1.

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