MagnaChip Semiconductor Corporation (MX) Options Hot as Stock Tanks

Magnachip Semiconductor Corp (MX) has erased nearly half its value this morning

Andrea Kramer
Feb 13, 2015 at 10:46 AM
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Magnachip Semiconductor Corp (NYSE:MX) has surrendered almost half its value to trade at $7.66, and earlier touched a three-year low of $6.40, after the Korea-based firm filed restated results for fiscal years 2011-2013. The stock has been relegated to the short-sale restricted list, yet it looks like option players are rolling the dice on a short-term recovery.

Overall option volume is running at 23 times the average mid-morning pace, yet calls have outnumbered puts by a margin of about 2-to-1. Most of the action has transpired at the February 7.50 call, where buyers are gambling on MX to move north of $7.50 through the close next Friday, when front-month options expire. Specifically, the buyers will make money if MX climbs atop $7.93 (strike plus volume-weighted average price of $0.43).

In light of MX's massive slump, delta on the call -- which was deep in the money as of yesterday's close -- fell to 0.61 from 0.97 last night. In other words, the contracts now sport about a 61% chance of expiring in the money.

Leading up to Magnachip Semiconductor Corp's (NYSE:MX) restated results, short-term option players were paying up to bet on MX, and most were aiming bullishly. The equity's Schaeffer's Volatility Index (SVI) of 137% sits 3 percentage points from an annual peak, reflecting historically pricey near-term premiums, and the stock's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 3.28.


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