KLA-Tencor is trying to make a higher low, and one investor is using an unusual strategy to get long.
optionMONSTER's Heat Seeker tracking program detected the purchase of 1,900 August 50 calls for $0.44 and the sale of an equal number of July 44 puts for $0.34. Volume was more than 5 times open interest at each strike.
The trade cost $0.10 and is similar to owning shares in the maker of semiconductor equipment but has an unusual risk/reward profile because of the different expiration months at play. It has downside risk for the next 1-1/2 weeks and upside potential in the next 5-1/2 weeks.
KLAC is up 0.44 percent to $45.69 in afternoon trading. It's is down 14 percent in the last three months but is trying to make a higher low than the $44 area where it bounced at the beginning of June.
Today's option trade is carefully tailored around the next quarterly report, which will probably occur during the last week of the month. The July short puts will have expired by then, eliminating downside risk, but the investor will still have upside exposure thanks to the August long calls . (See our Education section)
Earnings and revenue beat expectations the last time results came out in April. Management also issued strong guidance, citing demand from smart-phone makers.
Overall option volume in KLAC is twice the daily average so far today, according to the Heat Seeker.
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