Avago Technologies Limited (AVGO) Retreat Sparks Rush of Put Activity

Semiconductors are getting slammed today, and Avago Technologies Ltd (AVGO) is no exception

by Karee Venema

Published on Mar 25, 2015 at 2:57 PM
Updated on Apr 20, 2015 at 5:32 PM

It's a rough day on the semiconductor circuit, and Avago Technologies Ltd (NASDAQ:AVGO) is no exception. Just two days after hitting a record peak of $136.28, the stock has plunged 5.3% today to linger near $126.09, and put volume has popped to almost three times what's typically seen at this point in the day.

The equity's most active put is the April 120 strike, where new positions are being purchased. By buying the puts to open, speculators expect AVGO to slide below the strike price by the close on Friday, April 17 -- when front-month options expire. Amid today's sector-related swoon, delta on the put has jumped to negative 0.29 from negative 0.12 at Tuesday's close, suggesting a greater chance the option will be in the money at expiration.

From a wider sentiment perspective, calls have been the options of choice on AVGO. The security's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 10.24 ranks in the 86th annual percentile. Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 0.53 -- which rests lower than 76% of similar readings taken in the past year -- signaling a distinct call-skewed preference among short-term traders.

Outside of today's dip, the stock has been a technical titan. Over the past 52 weeks, for example, Avago Technologies Ltd (NASDAQ:AVGO) has roughly doubled in value. More recently, the equity has outperformed the broader S&P 500 Index (SPX) by nearly 33 percentage points over the past three months -- something that hasn't gone unnoticed by the brokerage bunch.

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