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2 Huawei Suppliers Circled By Option Bears

NPTN and SWKS stocks gapped lower out of the gate today

May 16, 2019 at 11:32 AM
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President Donald Trump's latest efforts to stifle Huawei Technologies imports are weighing on several of the Chinese telecom company's U.S. suppliers. Among them are semiconductor concerns NeoPhotonics Corp (NYSE:NPTN) and Skyworks Solutions Inc (NASDAQ:SWKS). What's more, both NPTN and SWKS are seeing unusually heavy put volume this morning, pointing to a surge in bearish speculating.

NeoPhotonics stock was last seen 13.5% lower at $4.95, set for its worst session since December. The shares earlier fell as low as $4.89, marking territory not charted since November 2017.

Already this morning, NPTN has seen nearly 400 puts cross the tape -- nine times its average intraday volume. This is compared to 17  NPTN calls traded so far. Most of the action has transpired at the November 5 put, where it looks like traders are buying the puts to open. By doing so, they expect the security to extend its retreat south of $5 through the next six months.

While absolute volume tends to run light, puts have been the options of choice among buyers recently. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than three NPTN puts for every call in the past two weeks.

Meanwhile, several shorts are likely cheering today's bear gap, despite NeoPhotonics landing on the short-sale restricted (SSR) list today. Short interest accounts for about 7.5% of the equity's total available float, representing about six days' worth of trading, at NPTN's average daily volume.

Meanwhile, Skyworks Solutions stock is down 6.8% to trade at $73.38. The equity is on pace to close its February bull gap, and just this past week breached recent support in the $78-$80 neighborhood.

SWKS has seen more than 7,800 puts cross the tape this morning -- five times the norm, and roughly double the number of calls traded. Most active is the August 57.5 put, where it looks like sell-to-open action is occurring.

Elsewhere, Skyworks stock could be vulnerable to negative analyst attention. Despite the stock's recent slide and the escalating U.S.-China trade war, nearly half of the brokerage firms following SWKS maintain "buy" or better endorsements.


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