Option Traders Take Aim at Sinking Ambarella, Inc. (AMBA)

Ambarella Inc (AMBA) options are trading at twice the average clip

by Andrea Kramer

Published on Feb 13, 2015 at 1:10 PM
Updated on Jun 24, 2020 at 10:16 AM

Like fellow semiconductor stocks Magnachip Semiconductor Corp (NYSE:MX) and Freescale Semiconductor Ltd (NYSE:FSL), the shares of Ambarella Inc (NASDAQ:AMBA) are volatile today. The stock has shed 7.5% to linger near $51.01, though the specific catalyst is unclear, and AMBA options are crossing the tape at twice the average intraday clip.

On the bearish side of the aisle, it looks like traders are gambling on an extended swoon for AMBA through 2015 and beyond, buying to open the January 2016 35-strike put -- the most active option thus far. The puts will move into the money if AMBA falls another 31.4% and breaches $35 by January options expiration.

On the flip side, buy-to-open activity has been detected at the February 55 and March 45 calls. Buyers of the former are expecting AMBA to rebound north of $55 by next Friday's close, when front-month options expire, while buyers of the latter expect the stock to hold its own atop $45 through the close on Friday, March 20, when the contracts cease trading.

From a broader sentiment standpoint, AMBA traders have been purchasing puts over calls at a faster-than-usual clip. The equity's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.77 stands higher than three-quarters of all other readings from the past year.

Echoing that pessimistic skew, short interest accounts for one-third of AMBA's total available float. At the stock's average pace of trading, it would take more than seven sessions to buy back all of these bearish bets.

On the charts, Ambarella Inc (NASDAQ:AMBA) is now struggling to stay in the black on a year-to-date basis. What's more, the security is in danger of ending south of its 10-week moving average for the first time since mid-August.

Weekly Chart of AMBA since August 2014 with 10-Week Moving Average

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