Semiconductors have outperformed other technology industries in recent months, but traders turned bearish on several key names in the space yesterday.
Although investors began the week with some bullish positions on chip makers, our scanning systems detected downside option activity yesterday in Advanced Micro Devices, Intel, Texas Instruments, and Micron:
- AMD: 14,800 January 12 puts bought for $0.73 to $1.08, 14,300 January 13 puts were purchased for $1.45 to $1.76, and 8,200 Weekly 12 puts expiring on Jan. 13 were bought for $0.63 to $0.90, all far above open interest.
- MU: 3,600 Weekly 22.50 puts expiring on Jan. 6 were purchased for $0.22 to $0.35 against open interest of 546 contracts, and 2,200 Weekly 23.50 calls in the same expiration sold for $0.39 against open interest of 600 contracts.
- INTC: 21,800 January 38.50 calls sold for $0.09 to $0.12 against open interest of 1,356 contracts.
- TXN: 7,175 January 78 calls were sold in one second for $0.20 and $0.21 against no open interest.
Long puts lock in the price where a stock can be sold, so they make money if shares decline. Investors use them to hedge long positions or to speculate on a drop.
Short calls generate income and lock in the price where a stock must be sold. The trade is usually done in conjunction with long shares in a covered-call strategy, reflecting a belief that gains will be limited through expiration. (See our Education section)
AMD dropped 4.31 percent to $11.55 yesterday but is up 85 percent in the last three months. The semiconductor maker announced mixed quarterly numbers on Oct. 20 and is expected to release its next results after the close on Jan. 17. Total AMD option volume was twice its daily average, with puts eclipsing calls by a narrow margin.
MU fell 2.23 percent to $22.78 yesterday but is up 29 percent in the last three months. The memory-chip manufacturer released mixed results on Oct. 4, and its next quarterly report is estimated to come out after the close on March 30. Overall option volume was about average in MU.
INTC was down 1.19 percent to $36.63 yesterday but is up 5 percent in the last month. The chip giant reported mixed results on Oct. 18 and is scheduled to announce its next earnings numbers after the close on Jan. 26. Overall option volume was about average in the name.
TXN slipped 1.1 percent to $74.05 yesterday but is up 8 percent in the last three months. The circuit maker's last quarterly report on Oct. 26 was bullish, and its next earnings release is expected after the close on Jan. 24. TXN's total option volume was 3 times greater than average.