3 Apple Suppliers Seeing Unusual Options Activity

Qorvo shareholders could be buying options insurance ahead of earnings

Oct 30, 2017 at 2:03 PM
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Reports of solid demand for Apple's iPhone X have a few Apple Inc (NASDAQ:AAPL) suppliers soaring today. Of note, Broadcom Ltd (NASDAQ:AVGO) and Qorvo Inc (NASDAQ:QRVO) stocks are moving higher, while shares of Finisar Corporation (NASDAQ:FNSR) are jumping on reports of possible Apple ties. What's more, AVGO, QRVO, and FSNR are all seeing unusual options activity this afternoon.

AVGO Stock Secures Record High

Broadcom stock was last seen 3% higher at $260.60, and earlier notched an all-time high of $262.20 -- muscling north of congestion in the $258-$260 area that's limited the equity's upside momentum since June. Against this backdrop, AVGO call options are crossing the tape at three times the intraday norm, and have roughly tripled put options thus far.

Specifically, AVGO has seen about 15,000 calls change hands, compared to fewer than 6,000 puts. Most active are the November 260 and 267.50 calls, with close to 1,200 contracts traded apiece. However, it looks like some of the activity at the out-of-the-money November 267.50 strike is sell-to-open, meaning the speculators expect AVGO shares to remain south of $267.50 through November options expiration.

Whatever the motive, today's appetite for Broadcom calls is just more of the same. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.44 indicates that calls more than double puts among options set to expire within three months. Plus, this ratio sits higher than just 2% of all other readings from the past year, indicating near-term traders have rarely been so call-heavy on AVGO.

QRVO Shareholders Could Be Buying Options Protection

Qorvo stock was last seen 3.3% higher at $76.14, set for its highest close since mid-June. The equity has rallied about 21.4% since its July lows, supported by its ascending 200-day moving average. However, QRVO put options are popping today, possibly as traders seek protection ahead of the company's earnings release on Wednesday.

QRVO has seen more than 1,700 puts traded so far -- four times the average intraday put volume, and more than twice the number of calls exchanged. Most of the action has transpired at the January 72.50 put, where a block of 1,100 contracts was likely bought to open. Considering QRVO's ascent over the past few months, the buyers of the puts may be shareholders seeking options insurance ahead of earnings.

Although options volume on the Apple supplier tends to run light on an absolute basis, near-term traders haven't been more put-biased during the past year. QRVO's SOIR sits at an annual high of 1.53.

Meanwhile, short interest represents nearly two weeks' worth of pent-up buying demand, at the security's average pace of trading. And not even half the analysts following QRVO deem it worthy of a "buy" rating. Should the company exceed earnings estimates later this week, a short squeeze or a round of upgrades could propel the shares to new highs.

FNSR Stock Jumps on Apple Hopes

Finally, Finisar stock is up 5.5% at $23.02, amid renewed chatter that the company could supply lasers for Apple. Analysts at Northland Capital said Finisar's recent purchase of a Texas facility is "a very clear signal that FNSR has received hoped for final qualification for high power VCSEL lasers from AAPL and is moving forward with plans to increase internal production by several fold over the next year."

This isn't the first time FNSR shares have jumped on AAPL speculation, though. The shares soared on Oct. 19 for similar reasons, only to back down from their 80-day moving average. The stock has dropped nearly 24% year-to-date, and options traders today are apparently rolling the dice on more downside.

FNSR has seen nearly 1,300 puts cross the tape -- 1.7 times the average intraday pace. Most popular is the November 23 put, with more than 1,000 contracts traded. Traders buying the puts to open expect the shares to retreat back beneath the $23 level in the short term.

Today's apparent put buying is just more of the same for FNSR, though. 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 sits at an annual high of 2.86. In other words, options buyers have picked up Finisar puts over calls at an annual-high clip during the past two weeks.


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