Here are 2 trade 'options' for this strengthening semi stock

“Design wins” drive semiconductor sales. In technology, companies fight hard to get design wins that have some meaningful shelf life.? And in the semiconductor industry, the competition is fierce.

For over 30 years, Intel (NASDAQ:INTC) has dominated the microprocessor industry.? This 800-lb. gorilla holds 80% of the share of microprocessors used in desktops, laptops and servers (Advanced Micro Devices (NYSE:AMD) has the other 20%.) ?Intel��s x86 architecture of the central processing unit (CPU) dates back to Intel��s 8086 that was released in 1978.

The x86 architecture was the design win of design wins. Its continuous refinement has essentially locked out all competition. But �� we are hearing some rumblings in the semiconductor jungle that the gorilla��s lunch is under attack.? The buzz is that the PC’s x86 is being eaten from the underbelly.

When industry analysts start talking glacial shifts like this, it is time to listen.

The attack is coming from ARM Holdings (NASDAQ:ARMH), which is based in Cambridge, England.? ARMH designs microprocessors, physical intellectual property (IP) and related technology and software, and sells development tools.

Its designs are used in a broad range of end markets, from automotive to consumer electronics. Established semiconductor companies like Texas Instruments (NYSE:TXN), Samsung, STMicroelectronics and Atmel (NASDAQ:ATML) are licensing ARMH��s Cortex-M processors for their microcontrollers and smartcards.

On its second-quarter conference call, ARMH highlighted ��the increased level of design activity.��? On their third-quarter conference call, CEO Warren East said, ��That level of design activity has continued.��? ARM has signed 120 Cortex-M licenses for microcontrollers, 14 in Q3 alone. ARMH is working with Microsoft on Windows 8, which is scheduled to be released next ! fall.

ARMH��s strength in microcontrollers is lower power consumption — key in the mobile and tablet markets.? A competitor to Intel with an advantage is being well-received. This design-win momentum should drive earnings much higher.

AMRH is trading at $30. The stock has been consolidating a big 2010 move when the stock tripled.? We believe the stock is ready to start its next leg higher, and a great way to play this anticipated move is with options.? We recommend buying the ARMH Jan (2013) 30 Calls for $6.75 or better.

If you have an options account that allows you to sell puts, you might think of financing the call purchase by selling some puts — specifically, selling the ARMH Jan (2013) 25 Puts — and you would bring in that premium instead of spending it, as you would with the call purchase. Please note that selling puts brings on a higher degree of risk, and you should only sells puts in a stock you would not mind owning.

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