Analog Devices Gets Bullish Options Trade

By Mike Yamamoto, managing editor of OptionMonster

NEW YORK (TheStreet) -- As analysts debate the health of the semiconductor sector, at least one trader is apparently confident that chipmaker Analog Devices (ADI Quote) has room to run higher.

Options activity Monday was focused on the November 27.50 strike, in which a single block of 2,000 calls was bought for $1.65, according to OptionMonster's real-time tracking systems. The average turnover is only 24 calls a day at the strike, which showed open interest of 378 contracts.

Analog Devices finished the day up 1.6% to $28.02. The stock hit a new 52-week high of $29.71 on Sept. 10, but since then has slipped and has been bumping up against resistance around $28.

For the calls purchased Monday to turn a profit, the stock would need to gain at least 4% by the time the options expire on Nov. 20. The company is scheduled to release its next quarterly earnings report on the trading day after expiration.

The health of the chip industry in general remains an open question. Earlier this month, for example, Analog Devices was one of several chipmakers to receive a lower rating when Broadpoint Amtech downgraded the entire semiconductor sector. On Monday, however, Goldman Sachs reiterated its 2010 forecast of 13% growth in handset units, an area where Analog Devices hopes to expand.