Cree got hammered after its earnings report last month, but traders are looking for the LED company to recover those losses by autumn.
About 5,000 September 57.50 calls were bought for $1.11 to $1.35 in the last 30 minutes of Friday's session, led by a print of 3,161 that went for $1.29, according to optionMONSTER's Heat Seeker tracking system. Open interest in the strike was only 263 contracts before the trade appeared, indicating that this is a new position.
These long calls lock in the price where the stock can be purchased through mid-September no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $57.50. (See our Education section)
CREE rose 1.83 percent to $48.50 on Friday, closing just off the highs of the day. That follows a gain of nearly 3.3 percent in the previous session after the company announced next-generation products for use in everything "from lamps to stadium lighting."
The stock gapped down from $58 on April 23 on weak revenues and guidance. Shares had been trading in an extremely tight range mostly between $45 and $46 until Thursday's pop.
Total volume in the name topped 20,000 contracts on Friday, triple its daily average for the last month. Overall calls outpaced puts by a bullish 4-to-1 ratio.
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