Two key iPhone suppliers are drawing downside option activity after weekend reports that Apple plans to cut production.
Japanese financial newspaper Nikkei, citing calculations by Apple partners, estimated that the company will reduce production of the handsets by 10 percent in the first quarter of 2017. Yesterday our systems found put buying in Skyworks Solutions and Quorvo, which both make chips used in the iPhone:
- SWKS: 3,100 February 75 puts for $4.50 to $4.70. Volume surpassed open interest of 1,081 contracts,
- QRVO: 2,500 February 55 puts were purchased for $5.10 to $5.30 against open interest of 382 contracts.
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. (See our Education section)
SWKS rose 0.66 percent to $75.15 yesterday but is down 4 percent in the last week. The semiconductor maker reported bullish results on Nov. 3 and is expected to announce its next quarterly numbers after the close on Jan. 26. Total option volume in the name was twice its daily average.
QRVO rose 0.32 percent to $52.90 yesterday but is down 5 percent in the last three months. The chip manufacturer announced bearish quarterly numbers on Nov. 3 and is expected to release its next earnings results after the close on Feb. 2. Overall option volume was 4 times greater than average in QRVO, and puts outpaced calls by a bearish 10-to-1 ratio.
AAPL itself fell right after the open and was down for almost the entire session until rallying back into the green 10 minutes before the closing bell, up 0.28 percent to $116.15 yesterday. Total option activity was well below its daily average, with no unusual activity.