Unusual Options Activity: Applied Materials (AMAT)

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One trader is betting that shares of
Applied Materials (AMAT) will soar in the next two days. That’s because over 6,100 contracts traded on Friday’s $63.50 calls, a 42-fold surge in volume.

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  • With shares currently trading around $61.50, the option is about 3.3 percent out-of-the-money. The option buyer paid about $0.30, or $30 per contract. While inexpensive, the option stands a good chance of expiring at zero come Friday.

    Shares of the chipmaker have traded as high as $70 twice this year, first in February and then again in August. As with many tech companies, it’s been a volatile name with some large daily percentage moves that have attracted traders.
    Action to take: Short-term traders may like the bet expiring Friday, as it’s cheap and could have a big percentage rally depending on how shares perform intraday trading. But given how likely it is to expire at zero, it’s not the best way to trade options.

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    While more expensive, the March 2021 $65 calls are a reasonable bet here. Trading for around $5.85, the calls should rally on the next move higher in shares. And by having a few months, rather than two days to play out, the call buyer is much more likely to book a profit on this trade.

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