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Pre-Earnings Cree, Inc. (CREE) Traders Target a New Annual Low

Cree, Inc. puts traded at nearly three times the average daily rate on Thursday

by 8/1/2014 9:32 AM
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Cree, Inc. (NASDAQ:CREE) is slated to take its turn in the earnings confessional after the market closes on Tuesday, Aug. 12, and given the stock's history of post-earnings plunges, put players have been upping the bearish ante on CREE. Yesterday, specifically, put volume traded at 2.9 times the average daily pace, and per the stock's 30-day at-the-money implied volatility -- which rose 3.8% to 50.9% -- short-term options were in demand.

In fact, the equity's August 45 put saw the most action, with all signs pointing to buy-to-open activity. The volume-weighted average price (VWAP) for the puts was $1.46, making at-expiration breakeven $43.54 (strike less VWAP), or in annual-low territory. Profit will accrue on a move down to zero, while losses are limited to 100% of the premium paid, should CREE settle north of the strike at the close on Friday, Aug. 15 -- when front-month options expire.

This bearish bias isn't too surprising when looking at CREE's technical performance. Year-to-date, the stock is off 24.5% to churn near $47.23. What's more, over the past four quarters, CREE has averaged a loss of 15.5% in the three-session period subsequent to reporting earnings, despite matching or exceeding analysts' bottom-line estimates each time. For Cree, Inc.'s (NASDAQ:CREE) fiscal fourth quarter, Wall Street is calling for a profit of 41 cents per share -- a 3-cent improvement over what the company earned one year ago.


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