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The shares of Cirrus Logic, Inc. (NASDAQ:CRUS - 23.34) have shed almost half their value since touching an all-time peak of $45.49 in mid-September, pressured beneath their 10-week moving average. Nevertheless, some options traders are gambling on round-number support for the tech concern, selling soon-to-be front-month put options.
During the course of Tuesday's session, CRUS saw roughly 14,000 puts change hands -- almost five times its average daily put volume, and more than three times the number of CRUS calls exchanged. Most active was the April 20 put, which saw close to 3,500 contracts cross at a volume-weighted average price (VWAP) of $0.55. Nearly all of the puts translated into fresh open interest overnight, and the majority crossed on the bid side, pointing to sell-to-open volume.
By writing the puts to open, the sellers expect CRUS to remain north of $20 through the next month or so. In this best-case scenario, the puts will remain out of the money, and the sellers can retain the entire net credit of $0.55. However, should CRUS breach the round-number strike -- moving into annual-low territory -- by April options expiration, the sellers could be on the hook to buy the shares at $20 apiece, representing a premium to what they'd pay on the Street.
Broadening our sentiment scope, we find that neutral-to-bullish bets are nothing new for the Apple Inc. (NASDAQ:AAPL) supplier. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.64 indicates that calls easily outnumber puts among options expiring within three months. Likewise, the security's 10-day call/put volume ratio stands at 2.80 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), indicating that option buyers have picked up nearly three CRUS calls for every put during the past couple of weeks.
In the same vein, seven analysts maintain "strong buy" endorsements, despite CRUS' technical troubles of late. For comparison, just two brokerage firms offer up middling "hold" suggestions, and not one harbors a "sell" or worse opinion.
As alluded to earlier, CRUS has surrendered nearly 50% since its mid-September peak, and has underperformed the broader S&P 500 Index (SPX) by close to 25 percentage points during the past two months. Should the stock extend its downtrend, an unwinding of lingering optimism could exacerbate selling pressure on the shares.
In early trading, CRUS has tacked on 2.4% to wink at the $23.34 level.