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Cree Attracts Eleventh-Hour Call Buyers

Speculators scooped up CREE's weekly 25- and 26-strike calls

by 6/29/2012 10:29 AM
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Semiconductor concern Cree, Inc. (NASDAQ:CREE - 25.76) was targeted by eleventh-hour option bulls yesterday, with traders scooping up the stock's weekly call contracts. Helping the equity buck the broad-market trend lower was an upbeat analyst note, after ThinkEquity upgraded its opinion of CREE to "buy" from "hold."

By the time the dust settled yesterday, CREE had seen about 10,000 calls cross the tape -- more than twice its average daily volume, and nearly four times the number of CREE puts exchanged. Attracting notable attention was the weekly 25- and 26-strike calls, which saw around 2,300 and 700 contracts change hands, respectively. The majority of the calls traded at the ask price, and call open interest at the soon-to-expire strikes ballooned overnight, pointing to buy-to-open activity.

By purchasing the calls to open, the traders are expecting CREE to muscle atop the strikes by the closing bell today, when the weekly options expire. However, bullish bets are nothing new for CREE, which has racked up a 10-day call/put volume ratio of 9.64 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What's more, this reading ranks in the 87th percentile of its annual range, suggesting options players have bought to open CREE calls over puts at a quicker-than-usual step during the past couple of weeks.

Nevertheless, the short-term options crowd is still more put-heavy than usual, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.86, which registers in the 88th annual percentile. In the same pessimistic vein, despite decreasing by 16.1% during the past month, short interest still accounts for 18% of CREE's total available float, and would take nearly eight sessions to unwind, at the equity's average daily trading volume.

At last check, CREE has extended its recent upward momentum, bringing its week-to-date gain to 5.2%.


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