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It was an extremely busy session in Marvell Technology Group Ltd.'s (NASDAQ:MRVL) options pits Monday. Overall volume was 4.9 times the usual, led by put volume of roughly 44,000, or more than seven times the norm.
About 80% of the cumulative action went off during a pair of simultaneous block trades. To be specific, a block of 17,500 August 11 puts changed hands at the bid price of $0.17, while an identically sized block of September 11 puts were exchanged at the ask price of $0.39. Because open interest on the front-month strike lost about 14,700 positions overnight (indicating the options were sold to close) and open interest on the back-month strike picked up roughly 18,000 positions (indicating the options were bought to open), it appears that the speculator was rolling out his bearish bet.
Under this scenario, the trader received a net credit for selling the block of August 11 puts, and used those proceeds to help buy the September 11 puts. The resulting net debit -- which consists of the premium paid ($0.39) less the premium received ($0.17) -- was $0.22 per contract. Consequently, the put buyer now has an additional month to see if the Marvell Technology shares can sink from their current perch of $12.40 to the breakeven point of $10.78 (strike price less the net debit), with gains to be had for each successive step downward. Even if the fall doesn't materialize, the most at stake is the premium paid.
The bearish transaction was more of the same for the semiconductor issue. Schaeffer's put/call open interest ratio (SOIR) for MRVL stands at 1.46, which means puts outnumber calls among options expiring in the front three-months' series. More significantly, the SOIR is higher than all but 4% of readings taken in the past 52 weeks. In other words, short-term traders have rarely been as pessimistic as they are now.
Furthermore, among analysts covering the stock, 15 out of 23 rate it a "hold" or worse. Meanwhile, the consensus 12-month price target is $12.30 -- less than MRVL's current per-share price.
Technically, however, Marvell Technology Group Ltd. (NASDAQ:MRVL) has been an outperformer, tacking on over 70% year-to-date. What's more, earlier today, the shares hit an annual high of $12.48. If that trend continues, a series of analyst upgrades and/or price-target hikes could ensue, further energizing the stock's ascent.