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Weekly Options Traders Bet on Semiconductor Sector

Josh Selway

The semiconductor sector is in focus today thanks to a Wall Street Journal report saying that China may offer to buy more chips from the U.S. There's no sign the Trump administration would be open to such a plan, however, which may be why chip stocks are only sporting modest gains. Still, call traders are making moves on the VanEck Vectors Semiconductor ETF (NYSEARCA:SMH), as well as Advanced Micro Devices, Inc. (NASDAQ:AMD) and Micron Technology, Inc. (NASDAQ:MU).

Heavy activity on SMH's weekly 2/22 103-strike call has driven call volume to a higher-than-expected level today, and buy-to-open action looks likely. If that's the case, these traders would be anticipating more upside from the exchange-traded fund (ETF) through next Friday's close, when the weeklies expire.

The semiconductor ETF was last seen trading at $102.20, up 0.5% on the day, setting the stage for a third straight close atop the 200-day moving average. The security has been in an uptrend in early 2019, but is now approaching its year-over-year breakeven point.

smh etf chart

AMD calls are also crossing at an accelerated pace, and new positions are opening at the weekly 2/2 23.50- and 24-strike calls. The chipmaker has been a strong target for those who've purchased premium in the last year, based on its Schaeffer's Volatility Scorecard (SVS) of 99, showing a strong tendency to make moves bigger than options traders were pricing in.

The shares of AMD are up 1% today at $23.08, consolidating atop their post-bear-gap highs from late 2018. After that pullback, the equity found solid support near its 200-day moving average, and sports a year-to-date lead of 25%.

amd stock price

Lastly, the most popular options on Micron Technology today are the soon-to-expire February 42.50 and 43 calls. There's also notable activity on the put side, where the March 39 and 40 strikes lead the way. Put open interest on MU outweighed call open interest 1,465,154 to 910,526 coming into today.

Keeping the focus on the 200-day moving average, MU has now moved to within about 3 points from the trendline, which it hasn't encountered since early September. The one-year breakeven point also sits right overhead, with the shares last seen at $42.36, up 1.6% for the day.

mu stock chhart