Amberella's Big Day Likely Due To Short Squeeze, Traders Say

• Shares of Ambarella Inc AMBA were trading up 12 percent on Tuesday, after gaining 4.85 percent on Monday.
• Several traders told Benzinga they think the surge was triggered primarily by a short squeeze.

Over the past three months, Ambarella’s stock lost roughly 50 percent of its value. However, the shares have been surging this week, having gained 4.85 percent on Monday, and continuing to surge almost 12 percent on Tuesday.

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Several traders believe Ambarella's move higher derived primarily from a short squeeze. Most noted that investors should take into account the fact that Ambarella is a supplier of GoPro Inc GPRO, noting they do not believe there is any reason for this strong of a move other than a short squeeze.

Looking At Options

According to CNBC, Ambarella on Tuesday saw 1.5 times the average daily call volume. Mike Khouw noted that, “There have been about 50 percent more bullish bets than bearish [in the options market].”

CNBC continued, “the most active strikes on the day Monday were buyers of the January 52.50 calls for an average purchasing price of $5.50. Since buying a call allows one the right to purchase a stock at a set time and price, these are bullish bets that Ambarella will rise above $58 by January expiration. That's a more than 4 percent rally from the current price of around $55.60.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.