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There are unusual options trades today in Marvell Technology Inc. (MRVL) stock - both puts and calls. The unusual activity in these large options activity serves to highlight the underlying value of MRVL stock.
The activity in these options can be seen in Barchart's Unusual Stock Options Activity Report today. For example, it shows that over 22,500 call options at the $76.00 strike price expiring on Friday, July 12, were traded. The stock is at $75.07 today, so these calls are only slightly out-of-the-money (OTM).
Unusual MRVL Puts and Calls Volume
In addition, the huge volume in these calls represents over 20 times the prior number of outstanding contracts at that strike price and expiry period. In other words, some investor(s) has taken a huge position in these calls. The buyer of these calls expects to see MRVL stock move significantly higher.
At the same time some large investors have taken a large position in out-of-the-money (OTM) ($67.50 strike price) MRVL puts that expire over a year and a half from now on Jan. 16, 2026.
It seems this is likely initiated by a short seller who wants to collect the immediate income from the short sale (i.e., $9.90 on the bid side). That represents a put yield of 14.67% (i.e., $9.90/$67.50).
It also means that if MRVL stock falls to $67.50 anytime in the next year and a half the investor's secured cash will be used to buy 130,000 shares (i.e., 1300 contracts x 100 shares). But the breakeven price will be much lower at $67.50-$9.90, or $57.60. That is over 23% below today's price.
So, in essence, this is a very bullish trade in MRVL stock and the call volume. The bottom line is that some investors are very bullish on MRVL's value. Let's review why that might be.
MRVL Stock's Underlying Value
I recently discussed why Marvell Technology stock looks undervalued in a June 7 Barchart article: “Marvell Technology Stock Still Looks Cheap Despite Disappointing Results.”
At the time, MRVL stock was at $68.10, and I wrote that, based on its powerful free cash flow (FCF), MRVL stock was worth $89.21 per share.
For example, I projected that this chip design technology company could generate $1.353 billion in FCF over the next 12 months (NTM). This was based on analysts' revenue forecasts and using a 21.67% FCF margin.
Therefore, using a 1.75% FCF yield metric, MRVL could end up with a $77.3 billion market valuation (i.e., $1.353 billion/0.0175 = $77.3 billion). That is 28.6% higher than its present $60.1 billion market cap.
In other words, MRVL stock is still worth almost 29% more than its price today of $75.07, or $96.54 per share.
That is likely why these investors are taking bullish call and put option positions in MRVL stock.
Analysts Agree MRVL Stock is Undervalued
Wall Street analysts also have higher price targets for MRVL stock. For example, 30 analysts surveyed by Yahoo! Finance have an average price target of $89.29 per share. That is 18.9% higher than today's stock price of $75.07.
Similarly, 29 analysts surveyed by Barchart have a mean target price of $88.94 per share. AnaChart.com, a new sell-side analyst tracking service shows that the average of 26 analysts is $85.93, or 14.5% higher.
The bottom line is that analysts feel that MRVL stock looks undervalued here. That adds to the reasons why these investors may be taking bullish positions in MRVL puts and calls.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
