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Short-Term Bears Flock to 13-Strike Puts on OmniVision Technologies

Put buyers are betting on OVTI to resume its longer-term decline

by 1/30/2012 3:22 PM
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Bearish bettors have set their sights on OmniVision Technologies, Inc. (OVTI - 13.82) today, with put volume skyrocketing to six times the norm. So far, roughly 7,850 put options have crossed the tape on OVTI, compared to just 756 call contracts. Traders are dividing their attention between the stock's February 13 put, where 3,784 contracts have changed hands, and the March 13 put, where 3,426 contracts have been exchanged. Most of these puts traded closer to the ask price, suggesting they were purchased, and today's volume is outstripping open interest at both strikes. In other words, it seems safe to assume that new bearish put positions are being initiated on OVTI.

By purchasing these puts, traders are looking for OVTI to tumble below $13 during the near term. The stock has actually turned in an impressive performance so far in 2012, up about 18% year-to-date. However, the equity has shed 4.3% this afternoon, and is threatening to resume a longer-term decline beneath pressure at its 10-week and 20-week moving averages. Over the past 52 weeks, these descending trendlines have guided OVTI to a loss of 44.5%.

As a result of this lackluster technical performance, puts have emerged as the clear options of choice on the semiconductor stock. OVTI's Schaeffer's put/call open interest ratio (SOIR) stands at 1.15, with puts outnumbering calls among options slated to expire within three months. This ratio registers in the 93rd annual percentile, as speculative investors have rarely shown a greater preference for puts over calls during the past year. Considering today's put-skewed volume, we could see this indicator move even deeper into bearish territory overnight.


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