Players grab Rambus calls before injunction ruling
CHICAGO (Reuters) - Option speculators on Wednesday were betting on more gains in the stock of memory chip technology designer Rambus Inc (RMBS.O), a move that could be related to an expected injunction ruling in its patent litigation.
Rambus shares rose 3.45 percent, or 57 cents, to $17.07 on the Nasdaq after hitting a session high of $18.03.
The activity in Rambus options was heavy. The trading volume was five times the daily level as about 70,000 calls, which give the right to buy the stock at a given price and time, and 25,000 puts, which give the right to sell the stock at a specified price and time, changed hands, according to option analytics firm Trade Alert.
"There is significant option volume in Rambus. It appears to be (investors) positioning for a move higher, possibly
in anticipation of a favorable court ruling regarding an injunction against Hynix Semiconductor," said strategist Frederic Ruffy at Web information site WhatsTrading.com.
In one transaction, it looked as though option players were betting on a move past $20 by mid-August, requiring a 16 percent gain in Rambus shares by that time, said Interactive Brokers Group equity options analyst Rebecca Engmann Darst.
This may have been funded by the selling of 15,000 lots of the November $20 strike calls to purchase 15,000 contracts of the near-term August $20 strike calls in what was viewed as a calendar spread, she said. This could be earnings related since it coincides with the buying of August calls.
"A trader will do this if there is an anticipation of an event that would drive the closer-month volatility higher," she said.
ROYALTIES AT STAKE
In a trial involving Rambus and chip manufacturers, including Hynix Semiconductor Inc (000660.KS), Micron Technology Inc(MU.N) and Nanya Technology Corp (2408.TW), a jury in March found that Rambus did not violate antitrust laws or commit fraud in its attempt to protect patents.
A final decision from the court is still pending.
At stake are royalties of at least hundreds of millions of dollars that Rambus could collect from its technology that speeds the performance of memory chips used in a vast array of electronic devices.
On June 24, Rambus asked a San Jose federal judge to rule that Hynix stop making memory chips that use some of Rambus' technology.
The key catalyst in Rambus shares remains the pending injunction decision before a San Jose judge, which could come as soon as the next few weeks, wrote Jeffrey Schreiner, an analyst at Capstone Investments, in a research note to clients on Wednesday.
Schreiner maintains a strong "buy" rating on Rambus and raised his target to $37 a share from $34, reflecting higher calculated past-due royalties from DRAM manufacturers. Continued...
