Marvell Technology Group (NASDAQ:MRVL) is a global semiconductor provider of high-performance analog, mixed signal and digital signal processing integrated circuits. The company offers its customers a range of integrated circuit solutions using its communications mixed-signal processing and digital signal processing technologies. Marvell applies its analog, mixed signal, digital signal processing and complex digital design technologies in a variety of applications. Its product portfolio consists of storage, switching, transceivers, wireless, personal computers connectivity, gateways, communications controllers and power management products.
Marvell Technology Group has been a favorite among technology investors for the past two years and Friday's move to a long-term high near $36 suggests it is still a popular issue. The stock is also well-liked by option sellers as it generally has robust premiums and excellent liquidity, even in the "out-of-the-money" series. Of course, those qualities usually imply a potential for volatility and that is certainly the case with the company's earnings due in two weeks. However, we believe the probability of a move below $30 is relatively small and a drop to our cost basis near $27 seems very unlikely. At the same time, MRVL would not be a bad technology stock to own and, in our opinion, the return on investment is worth the risk. Conservative traders should target a higher bid price initially to increase the potential profit in the position. Those with a more aggressive attitude should consider the selling the MAR-$30 put for a credit of $0.65-$0.75 (profit 6%-7%).
Sell Put MAR 27.50 UVM-OY
Current Bid = $0.30 Open Interest = 496
Potential Profit (5 contracts) = $150
Initial Margin (5 contracts) = $3,770
Return on Investment (max) = 3.7%
Cost Basis in Stock = $27.20
Days to Expiration = 33