ON Semiconductor Surges 6.8% Amid Sector Volatility: What's Fueling the Rally?

Summary
• ON Semiconductor (ON) rockets 6.8% to $50.31, piercing a 52-week high of $78.61
• Sector peers like Microchip Technology (MCHP) rally 6.28%, signaling a broader tech rebound
• Options frenzy: 20 contracts traded, with 51-strike calls (ON20250815C51) surging 279%

ON Semiconductor’s 6.8% intraday surge has ignited a firestorm in the semiconductor sector, outpacing even its top rival Microchip Technology. With the stock trading at $50.31—up from a morning low of $48.01—the move defies a bearish technical backdrop and geopolitical headwinds. As the sector grapples with Trump-era tariffs and China’s chip ambitions, ON’s breakout raises urgent questions: Is this a sustainable rally or a short-lived spike?

Trump Tariff Fears and Sector Rotation Drive ON's Surge
ON’s 6.8% rally is driven by a perfect storm of options activity and sector rotation. The 51-strike call (ON20250815C51) exploded 279% in volume, indicating aggressive bullish positioning ahead of Friday’s expiry. This aligns with broader semiconductor ETF SOXL’s 5.72% surge, as investors bet on Trump’s 100% chip tariff threat spurring domestic manufacturing commitments. Meanwhile, ON’s 52-week low of $31.04 and -32.73x P/E ratio suggest undervaluation, attracting contrarian buyers amid sector-wide optimism.

Semiconductor Sector Rally Gains Momentum as ON Trails MCHP
The semiconductor sector is in a tailwind, with Microchip Technology (MCHP) surging 6.28% and SOXL ETF up 5.72%. ON’s 6.8% move outpaces its 52-week average return of 16.94%, but lags MCHP’s 7.33% intraday gain. However, ON’s options market is more volatile: 51-strike calls (ON20250815C51) traded 94,093 contracts, dwarfing MCHP’s 31-volume 48-strike calls. This suggests ON’s rally is more speculative, driven by short-term options positioning rather than fundamental sector rotation.

Capitalizing on ON’s Volatility: ETFs and Options Playbook
• 200-day MA: $53.46 (below current price)
• RSI: 18.11 (oversold)
• Bollinger Bands: $44.25 (lower) to $66.39 (upper)
• MACD: -2.10 (bearish) vs. Signal Line: -0.62

ON’s technicals present a high-risk, high-reward setup. The stock is trading near its 52-week low but has broken above the 50-day MA ($55.77) and 200-day MA ($53.46). For aggressive bulls, the 51-strike call (ON20250815C51) offers 41.5% leverage with a 279% implied volatility. A 5% upside to $53.12 would yield a 32.5% return on this contract. For hedgers, the 53-strike put (ON20250815P53) provides 77.25% leverage but is overpriced at 86.57% IV. SOXL ETF’s 5.72% surge validates sector momentum, but its 3x leverage amplifies volatility. Key levels to watch: $53.33 (200-day MA) and $44.25 (Bollinger Band support).

Top Options Picks
1. ON20250815C51 (Call)
- Strike Price: $51
- Expiration: 2025-08-15
- IV: 44.13% (moderate)
- LVR: 41.50% (high)
- Delta: 0.4409 (moderate)
- Theta: -0.1502 (high decay)
- Gamma: 0.1026 (high sensitivity)
- Turnover: 76,172 (high liquidity)
- Why it stands out: High leverage and moderate delta position this call to capitalize on a 5% upside to $53.12, yielding a 32.5% return. The high gamma ensures sensitivity to price swings, while the moderate IV suggests reasonable cost.
2. ON20250815P53 (Put)
- Strike Price: $53
- Expiration: 2025-08-15
- IV: 46.78% (moderate)
- LVR: 77.25% (high)
- Delta: -0.2711 (moderate)
- Theta: -0.1117 (high decay)
- Gamma: 0.0813 (moderate)
- Turnover: 11,629 (high liquidity)
- Why it stands out: This put offers 77.25% leverage with a 225% implied volatility, ideal for hedging a potential pullback. The moderate delta and high gamma balance risk and reward, while the high IV ensures cost efficiency.

Payoff Estimation:
- Call (ON20250815C51): 5% upside to $53.12 = $2.12 payoff (32.5% return).
- Put (ON20250815P53): 5% downside to $47.80 = $5.20 payoff (66.7% return).

Action Insight: Aggressive bulls may consider ON20250815C51 into a bounce above $53.33 (200-day MA). Hedgers should monitor ON20250815P53 for downside protection.

Backtest On Semiconductor Stock Performance
The backtest of a 7% intraday surge shows no impact on the entire market, with the maximum return being 1.82% on the maximum return day, indicating that such a surge does not consistently lead to significant market gains.

Ride the Wave or Hedge the Volatility: ON’s Breakout Demands Immediate Action
ON’s 6.8% surge is a high-stakes gamble between sector optimism and technical fragility. The stock’s 52-week low and -32.73x P/E suggest undervaluation, but its 6.8% move must hold above $53.33 (200-day MA) to validate the breakout. Aggressive bulls should target the 51-strike call (ON20250815C51) for a 32.5% return if the stock hits $53.12. Hedgers should monitor the 53-strike put (ON20250815P53) for downside protection. With Microchip Technology (MCHP) surging 6.28%, the sector’s momentum favors bold plays—but only if ON sustains its move above $53.33. Act now: Buy 51-strike calls or SOXL ETF before Friday’s expiry.