![]()
Applied Materials, Inc. (AMAT) skeptics are buying front-month put options
Applied Materials, Inc. (NASDAQ:AMAT) has stair-stepped higher in 2014, with the stock on pace to notch a 42.4% annual gain. Today, the equity is flirting with breakeven at $25.22, yet option traders are gambling on a rough start to the new year for the shares.
AMAT's intraday put volume is running at twice the average clip, and the security's 30-day at-the-money implied volatility has jumped 5.3% to 29.9%, reflecting a growing demand for short-term options. Indeed, the stock's January 2015 25-strike put is most active, and it looks like traders are buying the contracts to open.
By purchasing to open the at-the-money puts, the buyers expect Applied Materials, Inc. (NASDAQ:AMAT) to breach $25 within the next few weeks -- specifically, on or before expiration on Friday, Jan. 16. However, in order to do that, AMAT would need to give up a perch atop its 10-day moving average, currently located at $25.13. This trendline, along with its 20-day counterpart, has ushered AMAT to 11-year highs over the past few months.