Unusual Options Activity: Marvell Technology (MRVL)

Shares of semiconductor firm Marvell Technology (MRVL) have been trending higher in the past few months amidst a global chip shortage. One trader sees further upside ahead.

  • Special: This Company’s Share Price has Increased 1650% Since 2016
  • That’s based on the March $75 calls. With 148 days until expiration, over 2,390 contracts traded against a prior open interest of 143, for a 17-fold rise in volume. The buyer of the calls paid $3.40 for the trade.

    With shares last trading near $68, the stock would need to rise just over 10 percent for the options to move in-the-money in the next few months.

    • This Company’s Share Price has Increased 1650% Since 2016.

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    Shares are already up about 61 percent over the past year and are at a 52-week high, so that may be a tall order. But the company has seen its revenue rise nearly 50 percent in the past year amid the global chip shortage.

    Action to take: At 32 times forward earnings, shares are trading at an average historical multiple for the company, a nice contrast considering a number of overvalued stocks in the market right now. Investors can lock in a 0.4 percent dividend yield here, although that yield hasn’t grown recently.

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  • For traders, the option is an inexpensive way to bet on a further move higher in shares. The current tech rally is unlikely to end anytime soon, and these calls could deliver high-double-digit returns, or even move into triple-digit territory and more than double a trader’s return.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.