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Bulls Pile Into Qualcomm at Highs

By Mike Yamamoto of OptionMonster

NEW YORK -- Qualcomm (QCOM) rebounded to new highs Monday, and option traders are looking for even more gains in the next two months.

More than 14,000 May 80 calls were purchased as premiums rose from $1.07 to $1.49, led by two prints of 4,500 that went for the ask price of $1.37, according to OptionMonster's Heat Seeker tracking system. The volume was far above the strike's previous open interest of 2,963 contracts, indicating that this is fresh buying.

These long calls lock in the price where the stock can be bought through mid-May no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $80.

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The chipmaker saw bullish call buying in the April 75 strike in January, as reported on our InsideOptions Pro subscription service at the time.

Qualcomm's stock rose 3.05% to $77.02 Monday after peaking at $77.31 in the afternoon, its highest price since March 2000, making up all of last week's losses. Shares have been bouncing in a range since early February but have held support at their 50-day moving average.

Goldman Sachs reiterated its "buy" rating on the stock Monday and raised its price target to $90 from $82. The investment bank cited an announcement by China Mobile that its 4G phones will be required to support five mobile standards, a change that could help Qualcomm's chips gain market share.

Total option volume in the name topped 55,600 contracts, more than double its daily average for the last month. Overall calls outnumbered puts by more than 4.5 to 1, a reflection of the session's bullish sentiment.

Yamamoto has no positions in QCOM.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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