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JDS Uniphase Corp (JDSU) Bears Emerge Ahead of Earnings

Put option activity is heating up as JDSU prepares its fiscal third-quarter report

by 4/25/2013 8:57 AM
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Put volume spiked on JDS Uniphase Corp (NASDAQ:JDSU) during Wednesday's session, as roughly 10,000 contracts crossed the tape. By comparison, there are typically fewer than 2,000 puts exchanged on the telecom stock over the course of an average trading day. Meanwhile, only 3,046 JDSU calls changed hands on Wednesday.

The day's most active strike was the May 13 put, where 9,818 contracts were traded. Nearly all of these puts crossed closer to the ask price, indicating they were purchased, and this front-month option gained 7,622 contracts in open interest overnight. As a result, it's safe to assume that speculative players were adding new bearish bets on JDS Uniphase yesterday.

The volume-weighted average price (VWAP) on those puts was $0.63, which means put buyers will begin to profit if JDSU falls below breakeven at $12.37 (strike price less VWAP) by the time May-dated options expire. From Wednesday's close at $13.38, the stock would need to drop more than 7.5% before these bears will begin to see profits.

This sudden interest in JDSU puts precedes the company's upcoming earnings report, which is set to hit the Street after the market closes next Wednesday, May 1. Currently, analysts are looking for JDS Uniphase Corp to announce a profit of 11 cents per share on $417.28 million in revenue.

Ahead of this event, JDSU has been struggling on the charts, with the shares now sitting on a loss of 0.9% year-to-date. The stock has tested support in the $12.50 region on numerous occasions over the past couple of weeks, and its 10-week and 20-week moving averages are on the cusp of a bearish cross.


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