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Cadence traders undeterred by lofty price

Chris McKhann (chris.mckhann@optionmonster.com)

One investor sees no going back for Cadence Design Systems with the stock trading near a multiyear high.

A single print in the February 12 puts dominates today's option action. The 5,000 that trade eclipse the average daily volume of 104 and even outpace the total open interest for all strikes which stands at 4,000. The puts were sold for $0.70.

CDNS rose 1.17 percent to $12.92 in morning trading. The supplier of chip-design products is up to the highest levels since January 2008, when it was plunging from highs above $23 in mid-2007. Shares bottomed below $3 in late 2008 and have been trending higher since.

The put selling is a bet that the stock remain above $12 through that February expiration. It was below that price just a month ago and if it gets back there the trader faces the obligation to buy shares, which may in fact be the intention. See our Education Section for more on the strategy.

Overall option volume is 48 times greater than average in the name so far today.

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