Short-Term Traders Pounce on Sinking Ambarella Inc (AMBA)

Ambarella Inc's (NASDAQ:AMBA) technical woes continue, with the stock hitting annual lows

by Josh Selway

Published on Jan 8, 2016 at 2:29 PM
Updated on Jan 8, 2016 at 2:35 PM

Semiconductor stock Ambarella Inc (NASDAQ:AMBA) is selling off today, but the reason why is unclear -- though unconfirmed rumors are circulating that GoPro Inc (NASDAQ:GPRO) is switching suppliers. Regardless, the shares have dropped 10.5% at $45.07, earlier hitting an annual low of $44.61, and earning a spot on the short-sale restricted list. Against this backdrop, activity has picked up in the stock's options pits. 

Calls and puts are both crossing at roughly twice the average intraday pace. AMBA's weekly 1/8 series is seeing heavy play, with positions being initiated at the 45-, 46-, 47-, and 49-strike calls, as traders bet on an eleventh-hour move in the shares.

Looking back, call buying has had the advantage at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). AMBA's 50-day call/put volume ratio across these exchanges is 1.59 -- a number that lands in the 64th percentile of its annual range. 

AMBA is also heavily shorted, so there's a chance that some of this call buying is related to bearish traders hedging their positions. Specifically, 46.2% of the stock's float is controlled by short sellers, and would take over four days to buy back, at normal daily volumes. 

Technically speaking,  Ambarella Inc (NASDAQ:AMBA) has struggled mightily. The stock has slid over 65% since hitting an all-time high of $129.19 on July 23. Elsewhere, the company's primary business partner isn't performing any better

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