Buying A Call Option On Marvell Technology $MRVL

| May 29, 2015 | 0 Comments

semiconductors Buying A Call Option On Marvell Technology $MRVL

Big things are happening in the semiconductor industry.  Avago Technologies $AVGO is buying Broadcom $BRCM for $37 billion.  That’s the largest chip industry deal ever.  The combined entity will provide chips for everything from iPhones to server farms.

That’s obviously big news for the industry, which has seen some huge mergers over the last couple years.

The Avago announcement could also have significant implications for other chipmakers.  There are still plenty of large and mid-sized semiconductor companies ripe for takeover.

One such acquisition prospect is Marvell Technology $MRVL.

$MRVL is a $7 billion semiconductor company.  Marvell focuses on embedded and standalone integrated circuits.  The company does $3.7 billion in sales per year and earns about $435 million in profits.

Currently, $MRVL is trading at $14.25.  That’s 15% from the 52-week high and 23% from the 52-week low.  The stock is down 4% on the year so far.

So is now the time to buy a call option on $MRVL?

As a reminder, a call option makes money when the underlying stock goes up.  Is $MRVL going to rebound as a potential acquisition target?

For a more in-depth look at the integrated circuit company, you can click the link.

Here’s the deal…

$MRVL shares recently dipped after the company posted lackluster earnings.  However, the stock rebounded once the AVGO deal was announced.  Apparently, a rising tide lifts all boats.

However, an acquisition or merger with Marvell makes senseThe company is still a big player in the industry.  It holds $2.5 billion in cash and no debt.  And, after the subpar earnings, the stock is still reasonably priced.

Here’s the chart of $MRVL:

call option buying opportunity, a chart of $MRVL

As you can see above, the stock dropped after the earnings release, but quickly regained ground after the Avago news.  Still, it has yet to reach the 50-day moving average.

Now could be a great time to buy a $MRVL call option

$MRVL’s fundamentals make it a good acquisition target in an industry which is seeing a lot of action.  The company is relatively cheap, so buying upside calls options (for a potential acquisition) won’t be too costly.

I recommend buying a longer-term $MRVL call in this situation.  The January 2016 15 calls are trading just over $1.00.  That looks plenty reasonable to me, especially for a call with over six months of time value and just about $0.75 to go to be in-the-money.

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

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