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JDS Uniphase Corp (NASDAQ:JDSU) is extending its recent advance, which was triggered by sector peer Finisar Corporation's (NASDAQ:FNSR) well-received quarterly earnings results last Thursday. Nevertheless, bearish betting has accelerated on the JDSU today, with roughly 3,200 puts crossing the tape so far -- nearly double the expected intraday volume. By contrast, fewer than 400 calls have changed hands.
The clear front-runner is the December 12 put, which has seen 2,500 contracts exchanged at a volume-weighted average price (VWAP) of $0.32. Since the bulk of these puts traded at the ask price, and implied volatility has ticked 2 percentage points higher, it's probable that new long positions have been added at this strike.
By purchasing the puts to open, speculators are counting on JDSU to retreat below the breakeven rail of $11.68 (strike price less the VWAP) by December expiration. This represents a drop of about 22.5% from the stock's present perch at $15.08. The delta for this option stands at negative 0.15, suggesting it has a 15% chance of finishing in the money. Still, should the shares remain north of the strike price through the close on Dec. 20, the most today's bears stand to lose is the premium paid. If today's out-of-the-money put buyers are actually just JDSU shareholders looking to hedge their bets, any lost premium may be worth their peace of mind over the next three months.
JDS Uniphase Corp (NASDAQ:JDSU) has been in rebound mode over the past several sessions, after suffering a notable bearish gap on Aug. 15. However, it's worth mentioning that the security's Relative Strength Index (RSI) of 64 is nearing overbought territory, implying that another pullback could be on the horizon for JDSU.
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