Ambarella, Inc. (AMBA) Option Volume Skyrockets as Stock Gets Iced

Ambarella Inc's (AMBA) fall from grace has fueled short-term option trading

by Andrea Kramer

Published on Jun 22, 2015 at 1:51 PM
Updated on Jun 24, 2020 at 10:16 AM

While the major market indexes are rallying on hopes of a Greek debt deal, the shares of semiconductor concern Ambarella Inc (NASDAQ:AMBA) are on pace for their worst day on record. The stock is down 19.5% at $96.04 -- and on the short-sale restricted list -- poised to close in double-digit territory for the first time since June 3, amid lingering concerns from a short-seller report. Against this backdrop, AMBA options are flying off the shelves. 

Specifically, intraday option volume is running at four times the typical pace, with puts edging past calls. The security's 30-day at-the-money implied volatility has skyrocketed 31.2% to 71.7% -- a new annual high.

It looks like short-term bears are buying to open weekly 6/26 100-strike puts, gambling on AMBA to extend its retreat beneath the century mark through Friday's close, when the options expire. Slightly longer-term bears are betting on an even deeper plunge, buying to open July 90 puts. The puts will move into the money if AMBA breaches $90 -- territory not charted since late May -- by the close on Friday, July 17, when front-month options expire. 

Even before AMBA's recent fall from grace, option players were picking up long puts over calls at a faster-than-usual clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.22 stands higher than 91% of all other readings from the past year. 

In the same vein, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.24 sits in the 78th percentile of its annual range. In other words, short-term option traders are more put-heavy than usual. 

Prior to Friday, AMBA was flying high on the charts. The stock touched a record peak of $128.06 on Thursday, and boasted a year-to-date gain of more than 150%. That lead has been trimmed to less than 90% today. 

So, what caused the stock's decline? As alluded to earlier, Citron Research late last week waxed pessimistic on the company's growth prospects, and said the stock could lose more than half its value over the next year, setting a 12-month price target of $60, and an 18-month target of $40. 

However, short sellers were betting on Ambarella Inc (NASDAQ:AMBA) to crumble, even before the aforementioned short-seller report. Short interest represents more than 28% of the equity's total available float.


A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!


  
 
 

Partnercenter