Time to Buy Puts on This Apple Supplier

Qorvo's short-term options are relatively cheap at the moment

Feb 14, 2018 at 12:46 PM
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Shares of Qorvo Inc (NASDAQ:QRVO) gapped more than 16% high on Feb. 1, after reports of an iPhone supply deal sparked a round of bullish analyst attention. QRVO stock topped out at at two-year high of $85.24 that day, but quickly pulled back to the $74-$75 region, home to its late-January highs. And while the equity has since been trading above support at its 10-day moving average, short-term losses could be on the horizon for the Apple supplier, if history is any guide.

Specifically, QRVO has been one of the worst stocks to own on the S&P 500 Index (SPX) during Presidents Day week, per data from Schaeffer's Senior Quatitative Analyst Rocky White. Looking back over the past 10 years, the equity has finished the holiday-shortened week in positive territory only three times, and has averaged a loss of 3.58%. Based on the stock's current perch at $78.56 -- down 1% so far today -- another move of this kind would put it near $75.74, below the aforementioned trendline.

Options traders have been bracing for more downside for QRVO shares, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.73 ranks higher than 84% of all comparable readings taken in the past year, meaning puts have been bought to open over calls at a faster-than-usual clip.

It's an attractive time to bet on the stock's short-term trajectory with options, though. QRVO's Schaeffer's Volatility Index (SVI) of 35% ranks in the 27th annual percentile, indicating muted volatility expectations are being priced into near-term contracts. And regardless of where the stock settles at expiration, the most options buyers stand to lose is the initial premium paid.


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