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Xilinx bulls come back for more

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Xilinx attracted bullish option action earlier this week, and traders are already repositioning for more gains.

optionMONSTER's Heat Seeker system yesterday detected the sale of 2,395 March 50 calls for the bid price of $1.21 and the purchase of 4,790 June 55 calls for the ask price of $0.73. Volume was below open interest in the nearer-dated contracts but above it in the June strike, indicating that a long position was rolled forward.

The trader is selling the March contracts and using the proceeds to purchase twice as many calls at the higher strike three months later. On Wednesday our scanners identified heavy buying in those March 50 calls, which have already seen a signifcant increase in premiums as the stock has risen.

The new long calls lock in the price where XLNX can be purchased through mid-June no matter how far it might rise. But the contracts will expire worthless if shares remain below $55. (See our Education section)

XLNX gained 2.21 percent yesterday to close at $49.98. That was a penny off the session peak of $49.99, which is the stock's highest price since June 2001.

The chip maker fell sharply after missing revenue estimates in January, but shares bounced at the $45 level early this month and have been climbing since then. Xilinx rallied on Tuesday after raising its quarterly dividend and receiving a "buy" recommendation from MKM Partners, which initiated coverage of the name with a $54 price target.

Total option volume in the name surpassed 14,400 contracts, 2.5 times its daily average for the last month. Overall calls outnumbered puts by 13 to 1.

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