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Mid-Cap Options Update: Cree, Inc. (CREE)

Cree, Inc. attracts long-term put buyers despite pop higher on the day

by 3/31/2014 2:26 PM
Stocks quoted in this article:

The 20 stocks listed below are the members of the S&P MidCap 400 Index (MID) that have seen the highest total options volume (calls and puts combined) during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One equity attracting long-term put buyers today is semiconductor name Cree, Inc. (NASDAQ:CREE).

Most Active Mid-Cap Options Table

CREE shares have followed the broader market into the black today, prompting put traders to swoop in and attempt to secure a more palatable premium as the stock edges higher. Intraday put volume is running at about double the normal pace, with the September 50 strike seeing notable attention.

Nearly all of the 1,440 puts trading at this out-of-the-money strike have gone off at the ask price, and volume exceeds open interest. These factors collectively suggest that speculators are buying to open these puts, as a wager that CREE will tumble between now and options expiration in five-plus months. Delta on the puts has dipped to negative 0.29 from negative 0.32, suggesting a 29% chance the puts will be in the money at the closing bell on Friday, Sept. 19.

Today's activity is a notable shift from recent trends. During the last 10 days on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CREE has racked up a call/put volume ratio of 6.56, which ranks higher than all but 4% of similar readings taken over the last year. Similarly, Schaeffer's put/call open interest ratio (SOIR) for CREE stands at 0.40, or 7 percentage points shy of an annual nadir. In other words, short-term option players have rarely been more call-focused during the last 12 months than they are currently (though, with 9.2% of the stock's float sold short, some of this may be the work of short sellers hedging their bets).

On the charts, CREE has hardly been impressive enough to warrant such bullishly slanted attention. The stock is practically unchanged on a year-over-year basis, and has logged a decline of 10.4% during 2014. Today, however, the shares are 1.8% higher at $56.03. If Cree, Inc. (NASDAQ:CREE) shares fail to slip south of $50 by the time these options expire, today's put buyers risk losing the premium paid, provided they opt to hold the options throughout the contracts' entire lifespan. The equity last breached the $50 mark in early April of last year, or nearly one year ago.


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