How Options Traders Profited Off This Flailing Chip Stock

The $47.50 level emerged as stiff resistance in the past month

Managing Editor
Dec 28, 2018 at 9:38 AM
facebook X logo linkedin


Subscribers to Schaeffer's Options Advisor service scored a 100% profit with the Western Digital Corp (NASDAQ:WDC) April 47.50 put we recommended. We'll take a closer look at why WDC appeared on our bearish radar, and how the winning options trade unfolded.

In the latest December issue of Options Advisor, Western Digital stock had already shed 50% year-to-date. On Oct. 26, WDC fell 18.2% in a brutal post-earnings dive. This bear gap took the shares below their 2018 half-high at $53.50, settling under the $47.50 level, an area that has since served as stiff resistance.

Short sellers were starting to come out of the woodwork, too. Short interest was up almost 47% from its mid-June lows, yet that only accounted for a slim 4% of WDC's total available float. Further, this total was 70% off its peak short interest levels from 2016. In short, there was ample room aboard the bearish bandwagon. 

In the options pits, there was plenty of optimism to be unwound. The stock's 10-day call/put volume ratio stood at 1.24 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). A shift in sentiment was in play to pressure the shares even lower. Plus, WDC had tended to make outsized moves relative to what the options market was expecting, per its SVS reading of 82 -- making it an attractive target for premium buyers.

After our put recommendation, Western Digital stock continued to slide on the charts. A C-suite transition, and some ensuing bear notes, put added pressure on the semiconductor name. We closed our position on Monday, Dec. 24, allowing our subscribers to lock in a 100% profit in less than a month.

Trade PM WDC

 

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI