Western Digital Stock Options Cheap as Toshiba Dispute Ends

WDC stock is trading nearly 4% higher ahead of the bell

Dec 13, 2017 at 9:29 AM
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Shares of Western Digital Corp (NASDAQ:WDC) are up 4% in electronic trading, after the chipmaker last night said it is dropping domestic arbitration claims against Toshiba over the sale of the latter's chip business to a group led by Bain Capital. Toshiba is abandoning its lawsuit against Western Digital, ending a months-long dispute between the two tech names -- which could have WDC stock recouping some of its recent losses.

Since being rejected near the $93 mark in late November, Western Digital shares have plunged more than 12%, due in part to a rare downgrade -- but found support at its 20% year-to-date level, closing last night at $81.77. Today's projected price move could have the security keying on two significant technical levels, including the formerly supporting 200-day trendline.

Despite the tech stock's recent technical troubles, puts are cheap at the moment, relative to their call counterparts. On Tuesday, WDC's 30-day implied volatility skew closed at 3.6%, in the 17th annual percentile.

Regardless of whether speculators are targeting puts or calls, though, low volatility expectations are being priced into short-term Western Digital options -- a potential boon to premium buyers. The stock's Schaeffer's Volatility Index (SVI) of 32% ranks in the 12th percentile of its annual range.


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