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November 16, 2006

Rambus Options Gain 7100%

posted by MR WAVETHEORY at 11/16/2006 11:27:00 PM
On November 16, 2006, Rambus options gained 7100% in a single day rising from $.025 per contract at the open to $1.80 per contract at the close. Investors who bought made at the absolute low made 71x their money. That ranks as a truly impressive gain. Even more amazing is the type of speculative activity that has surrounded Rambus Inc. (Nasdaq RMBS), a little company that holds an incredible amount of intellectual property in the area of DRAM.

Rambus is a company based in Los Altos, CA and the company became world famous for supplying the memory chips to the Nintendo 64 and subsequently the Sony PlayStation 2. Its chips are again in the Sony Playstation 3. Rambus XDR memory and FlexIO processor bus interface solutions are incorporated in the Cell processor in Sony's PlayStation 3.

Rambus is also famous for being embroiled in many intellectual property lawsuits. Rambus Direct RAM memory technology was intended to replace SDRAM and challenge DDR SDRAM as the standard memory used in computers, but it did not. The big memory makers balked at having to pay large licensing royalties to Rambus. An executive at Infineon Technologies AG (ADR) (NYSE IFX) was caught on the record saying, "[O]ne day all computers will be built this way, but hopefully without the royalties going to Rambus." However, Rambus owned a large number of patents and it sued and it won. The majority of Rambus revenues come from patent licensing. It has a virtual lock on key memory design technology.

That is why today was so interesting. Early in the morning, Rambus announced the end of an FTC hearing regarding its antitrust violations. Rambus ran hard because it appears unlikely that the commission will include DDR2 or DDR3 memory in its final remedy. That would limit any remedies, which could include capping Rambus' royalty rates, to older types of memory like SDRAM and DDR.

You can see the stock never looked back from the chart.

What is most amazing is the table below showing the top options gainers. Nine of the top 10 gainers were Rambus options.

The Top Options Gainers for 11/16/06
Rank Stock Option Option Symbol Close Change Volume Volume Change Open Interest Open Interest Change
1RMBSNOV06
20 Call
BNQKD.X1.81.775
(7100.0%)
5725857220
(150578.9%)
13247-60
(-0.5%)
2RMBSNOV06
17.5 Call
BNQKW.X4.254.125
(3300.0%)
121707749
(175.3%)
21536618
(3.0%)
3RMBSDEC06
22.5 Call
BNQLX.X21.9
(1900.0%)
71187098
(35490.0%)
657-
4RMBSDEC06
25 Call
BNQLE.X1.31.225
(1633.3%)
44644449
(29660.0%)
167-
5RMBSDEC06
20 Call
BNQLD.X3.052.825
(1255.6%)
106229731
(1092.1%)
2120-214
(-9.2%)
6RMBSJAN07
30 Call
BNQAF.X1.4251.3
(1040.0%)
64556249
(3033.5%)
19736-203
(-1.0%)
7RMBSJAN07
25 Call
BNQAE.X2.42.175
(966.7%)
50124677
(1396.1%)
8781223
(2.6%)
8ENTNOV06
7.5 Call
ENTKU.X1.21.075
(860.0%)
355235
(195.8%)
119728
(2.4%)
9RMBSJAN07
22.5 Call
BNQAX.X3.252.9
(828.6%)
42573901
(1095.8%)
6896135
(2.0%)
10RMBSFEB07
30 Call
BNQBF.X1.851.65
(825.0%)
743731
(6091.7%)
2031-
11RMBSFEB07
25 Call
BNQBE.X2.952.525
(594.1%)
16301592
(4189.5%)
253730
(1.2%)
12RMBSDEC06
17.5 Call
BNQLW.X4.84.075
(562.1%)
42613442
(420.3%)
5551374
(7.2%)
13NCTYNOV06
25 Call
NQTKE.X3.452.925
(557.1%)
96031
(3.3%)
829-254
(-23.5%)
14RMBSJAN07
20 Call
BNQAD.X4.33.6
(514.3%)
1125810470
(1328.7%)
14051207
(1.5%)
15RIMMNOV06
135 Call
RFYKG.X1.0750.9
(514.3%)
89187619
(586.5%)
4636533
(13.0%)
16RMBSFEB07
22.5 Call
BNQBX.X3.83.125
(463.0%)
1964419596
(40825.0%)
142546
(3.3%)
17HLFNOV06
40 Call
HLFKH.X1.1250.925
(462.5%)
168153
(1020.0%)
280715
(0.5%)
18MBINOV06
65 Call
MBIKM.X2.1751.725
(383.3%)
765568
(288.3%)
2749-31
(-1.1%)
19RATENOV06
35 Call
QIBKG.X3.052.375
(351.9%)
74-531
(-87.8%)
954102
(12.0%)
20RMBSFEB07
20 Call
BNQBD.X4.93.775
(335.6%)
49244859
(7475.4%)
38216
(0.2%)
Source: Yahoo! Finance

You can see the November 2006 20 Calls for RMBS jumped from less than $.025 cents to $1.80.

So, how much did traders make? About 57,258 Rambus November 20 call options were traded. To make an educated less, let's look at the price and volume. Assume half of the volume were buys and half were sells. You can see that about about half of the Rambus options traded before noon at roughly .25 each. The total value of these options would be $715,725. These options were trading at $1.80 at the close for a total value of $5,153,220. That implies they would have been worth $4,437,495.

Value at Close: $5,153,220
Cost of Options: $715,725
Net Profit: $4,437,495

That is a cool profit of $4.4 million. Who says the tech market is dead? Thank you FTC. Thank you Uncle Sam.

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1 Comments:

Blogger Donte said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


Joannah

http://transcendmemory.net

7:05 AM  

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