Xilinx, Inc. (XLNX) Earnings Beat Prompts Put Trading

Xilinx, Inc. (XLNX) shareholders may be using put options to hedge

by Josh Selway

Published on Oct 20, 2016 at 3:17 PM
Updated on Oct 20, 2016 at 3:32 PM

After the company topped analysts' earnings estimates and announced "a more deliberate share repurchase program," chipmaker Xilinx, Inc. (NASDAQ:XLNX) has been swinging between positive and negative territory. At last check, the stock was 0.6% higher at $49.93. What's more, traders are eyeing price-target hikes to $45 at Nomura and $48 at Barclays, while Citigroup said the semiconductor company has the "attributes of a good takeover target." Not surprisingly, XLNX options are trading at an accelerated rate. 

More specifically, traders are targeting XLNX put options at three times the rate expected for this point in the day -- though calls still have the advantage on an absolute basis. The most popular put today is the November 45 strike, which has a delta of negative 8%, giving the option a less than 1-in-10 chance of finishing in the money. Considering this, buying at this strike could be attributed to shareholders hedging their positions.

Looking back, any put buying in XLNX's options pits has been a relatively rare sight, with the stock sporting a 50-day call/put volume ratio of 16.53 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This extremely elevated ratio stands higher than 96% of the past year's readings, indicating a highly unusual bias toward call buying.  

This bullish approach from options traders hasn't been replicated elsewhere on Wall Street. Currently, just 25% of covering analysts recommend buying XLNX, and the stock's average 12-month price target is an uninspiring $52.06. And although just 4.8% of the stock's float is sold short, it would still take these bears more than a week to cover their positions, at XLNX's average trading pace. 

The mixed outlook across the Street makes more sense given the stock's performance on the charts this year. On the one hand, Xilinx, Inc. (NASDAQ:XLNX) is up a solid 6.3% this year. At the same time, the semiconductor stock has been subject to sharp selloffs -- illustrated by its 10% slide since hitting a two-year high in late September -- and has more recently struggled at the round $50 level.

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