Bearish Betting Picks Up Ahead of Cirrus Logic, Inc. (CRUS) Earnings

Cirrus Logic, Inc. (NASDAQ:CRUS) has done extremely well after earnings lately, but options traders seem skeptical toward the stock

Jul 27, 2016 at 11:12 AM
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Apple Inc. (NASDAQ:AAPL) is up post-earnings, while AAPL suppliers are racing higher, as well. One such stock is Cirrus Logic, Inc. (NASDAQ:CRUS), which is scheduled to report its own quarterly results this evening. Below, we'll take a closer look at CRUS stock and how options traders have been betting ahead of earnings.

Right now, CRUS is up 2.4% at $41.72, after earlier notching a three-year high of $42.88. This is business as usual for a stock that's zoomed 41% higher on a year-to-date basis, helped by a sharp bounce off its 50-week moving average in May.

crus weekly july 27

As CRUS has moved upward, options traders have nonetheless been sharpening their bearish swords. During the past 10 days, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly 11 puts for every call. The resultant put/call volume ratio of 10.77 ranks 2 percentage points from a 12-month high. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) is 1.34. In other words, puts outstrip calls among options set to expire in the next three months.

The options trading backdrop is similar today. Currently, puts are changing hands at quadruple the expected intraday rate, with buy-to-open activity detected at the August 41.50 strike. In other words, the pre-earnings put buyers are counting on -- or possibly hedging against -- a short-term pullback below $41.50.

As illustrated earlier, despite a few rare slips, history certainly favors the bulls -- and this is no less true when looking at Cirrus Logic, Inc.'s (NASDAQ:CRUS) recent performance after earnings. Over the past four quarters, the stock has advanced in the session subsequent to earnings three times, with an impressive average gain of 15%. This time around, the options market is pricing in a single-day, post-event swing of 13.8% in either direction.

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