Puts Pop on Downgraded Skyworks Solutions Stock

Long calls have been popular on SWKS in recent weeks

Apr 17, 2019 at 10:16 AM
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Macquarie downgraded Skyworks Solutions Inc (NASDAQ:SWKS) to "neutral" from "outperform," but maintained its $90 price target -- a discount to last night's close at $93.56. The brokerage firm said Apple's (AAPL) recent settlement with Qualcomm (QCOM) could create pressure for SWKS, and may limit the Massachusetts-based chipmaker's 5G growth potential.

In reaction, SKWS stock is down 2.5% at $91.22. Heading into today's trading, the tech shares were up almost 56% from their Jan. 3 low at $60.12, and gapped above previous resistance at their 200-day moving average in early April. Against this backdrop, the equity's 14-day Relative Strength Index (RSI) settled last night at 75, well into overbought territory, suggesting a near-term pullback may have been in the cards.

Options traders have been bracing for more upside. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SWKS' 10-day call/put volume ratio of 2.78 ranks in the 87th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Today, though, it's puts that are popular in early trading. At last check, 1,943 puts were on the tape -- six times what's typically seen at this point -- with the May 77.50 put most active. While it's not clear if these puts are being opened or closed, the lifetime of the option includes Skyworks Solutions first-quarter earnings report, due after the market closes on Thursday, May 2.

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