2 Sliding Apple Inc. (AAPL) Suppliers Rewarding Option Bears

Qorvo Inc (QRVO) and Skyworks Solutions Inc (SWKS) are both plummeting on the charts

Jun 27, 2016 at 3:42 PM
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While the broad market slumps in the wake of last week's "Brexit" referendum, two Apple Inc. (NASDAQ:AAPL) suppliers are taking an extra hit after BofA-Merrill Lynch said that semiconductor stocks are at risk amid "macro worries and summer slowdown." Not helping matters, Morgan Stanley initiated coverage with lackluster ratings on both Qorvo Inc (NASDAQ:QRVO) and Skyworks Solutions Inc (NASDAQ:SWKS).

At last check, QRVO is down 8.2% at $50.43, falling into negative year-to-date territory and dipping below its 30-day moving average for the first time since mid-May. Morgan Stanley began coverage on the stock with an "equal weight" rating and $56 price target. This represents a change of pace for QRVO, as 72% of the analysts following the stock rate it a "buy" or better.

Today's slide may be just what options traders were hoping for. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 2.59 QRVO puts for each call over the last 10 trading days -- a put/call volume ratio higher than 88% of comparable readings in the last year. Likewise, QRVO's Schaeffer's put/call open interest ratio (SOIR) of 1.33 sits in the 96th percentile of its annual range.

QRVO options are changing hands at a slower-than-average pace today. But it looks like the stock may be presenting an attractive opportunity for short-term buyers. The equity's Schaeffer's Volatility Index (SVI) of 39% sits in the low 11th percentile of its 12-month range, indicating that premium on the stock's near-term options is pricing in relatively low volatility expectations at the moment. At the same time, Qorvo Inc (NASDAQ:QRVO) has a Schaeffer's Volatility Scorecard (SVS) of 94 -- meaning the options market has tended to underprice the stock's ability to make outsized moves over the past year.

SWKS, meanwhile, has shed 6.1% to trade at $57.85 after Morgan Stanley initiated coverage with an "underweight" rating and a $61 price target -- well shy of the stock's average 12-month price target of $83.22. However, 16 out of 19 analysts had given SWKS a "buy" or betting rating coming into today's session, leaving plenty of room for future downgrades on the security, which has given up over 43% of its value over the past year.

Like its aforementioned peer, SWKS has seen an abundance of bearish attention in the options pits of late. The stock's 50-day put/call volume ratio of 1.17 sits higher than 93% of all readings in the past year. Today, SWKS puts are changing hands at twice their typical intraday pace. In fact, the intraday put/call volume ratio of 1.73 ranks in the 94th annual percentile. Most active is the stock's August 57.50 put, and while some contracts seem like they were bought to open, it looks like at least one trader bought to close a position today, according to data from the ISE.

Outside of the options pits, short interest has been on the rise. These pessimistic bets climbed by nearly 17% during the most recent two-week reporting period, and now represent 5.4% of Skyworks Solutions Inc's (NASDAQ:SWKS) total float.

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