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The shares of tech concern Cirrus Logic, Inc. (NASDAQ:CRUS) are swooning in sympathy with Apple Inc. (NASDAQ:AAPL), down 5.2% at $21.90. Against this backdrop, CRUS puts are flying off the shelves at a rapid-fire rate, with roughly 11,000 traded already today -- more than double the number of CRUS calls exchanged, and five times the stock's average intraday put volume.
Most popular has been the weekly 9/13 23-strike put, where more than 2,500 contracts have changed hands at a volume-weighted average price (VWAP) of $1.24. Ninety percent of the puts crossed on the ask side, implied volatility is 5.3 percentage points higher, and volume has surpassed open interest on the strike -- hinting at newly bought bearish bets.
By purchasing the puts to open, the buyers expect CRUS to extend today's retreat through the end of the week, when the options expire. More specifically, the investors' profit will increase the further CRUS sinks beneath $21.76 (strike price minus VWAP). Risk, meanwhile, is limited to the initial premium paid for the puts, should the security stage a rebound and climb back atop $23 by Friday's close. At last check, delta for the puts has soared from negative 0.46 to negative 0.81, reflecting escalating odds of finishing in the money.
Thanks to today's plunge, CRUS is testing support atop its 20-day moving average, which hasn't been breached on a daily closing basis since July 29. From a longer-term perspective, the equity has shed 24.4% in 2013, and has surrendered nearly half its value over the past year.
However, Cirrus Logic, Inc. (NASDAQ:CRUS) isn't the only AAPL partner suffering today; QUALCOMM, Inc. (NASDAQ:QCOM) is also swimming in red ink.
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