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One trader sold to open 5,000 Xilinx, Inc. (XLNX) puts
Xilinx, Inc. (NASDAQ:XLNX) is 2.3% lower this afternoon at $40.89, following a downgrade to "neutral" from "overweight," and a price-target cut to $44 from $47, at J.P. Morgan Securities. Meanwhile, with the company's earnings report due out next Wednesday evening, options are flying off the shelves at three times the expected intraday rate.
XLNX's most active strike is the out-of-the-money February 40 put, where a block of 5,000 contracts looks like it was sold to open this afternoon. In so doing, the trader anticipates the shares will maintain their perch atop the strike through February options expiration.
Turning to the charts, the $40 area has indeed been significant. XLNX bounced from here in late July, and in mid-October, gapped below the round-number strike before gapping back above it. In other words, the $40 mark could offer technical support going forward.
For those confident that support will hold -- as today's put writer appears to be -- now is a great time to sell premium on short-term options. XLNX's 30-day at-the-money implied volatility is 5.3% higher at 32.8%, which ranks in the 96th percentile of its annual range.
However, it's worth noting that Xilinx, Inc. (NASDAQ:XLNX) has made some sizable post-earnings moves in the past -- with several to the downside. Last July, the shares tumbled 14.3% in the session following the quarterly event, and in April, they dropped 9.1% over the same time frame.