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Traders bet ARM will muscle higher

Mike Yamamoto (mike.yamamoto@optionmonster.com)

ARM Holdings has been drifting lower for more than a week, but traders are betting that the chip maker will return to all-time highs by summer.

More than 2,500 July 44 calls were bought yesterday morning, led by a block of 1,400 that went for $1.95, according to optionMONSTER's Heat Seeker tracking system. These are clearly new positions, as open interest in the strike was just 78 contracts before the session began.

ARMH fell 3.25 percent yesterday to $41.11, continuing to retreat from a lifetime high of $44.47 reached on March 5. The semiconductor sector saw sharp gains in the beginning of the year but has slowed in recent weeks, according to our researchLAB analysis tool.

The calls bought yesterday, which lock in the purchase price of the stock, are looking for ARMH to climb to new heights by mid-July. These options could be sold earlier at a profit in the event of a rally but will expire worthless if shares remain below the $44 strike price. (See our Education section)

The U.K.-based company is scheduled to report first-quarter earnings on April 23 and second-quarter results on July 24, a few days after the July 19 option expiration.

Total option volume in the name exceeded 10,000 contracts, more than 5 times its daily average in the last month. Calls outpaced puts by 2 to 1.

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