Struggling SWKS Stock Sees Rare Pop in Put Volume

Bulls have been more active in SWKS' options pits in recent weeks

Sep 26, 2019 at 2:26 PM
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Chip stocks are trading lower today after a Bloomberg News report indicated the Trump administration may not extend waivers to U.S. tech companies supplying Chinese telecom giant Huawei. As a result, Skyworks Solutions Inc (NASDAQ:SWKS) stock, which also saw its price target cut to $74 at $78 at Susquehanna, is down 1.2% at $80.02.

Against this backdrop, SWKS put volume is running hot today, with roughly 3,500 contracts traded so far -- almost three times what's typically seen at this point. The weekly 9/27 80-strike put is most active, and data from Trade-Alert suggests new positions are being purchased for a volume-weighted average price of $0.91. If this is the case, breakeven for the put buyers at the close tomorrow, Sept. 27 -- when the weekly options expire -- is $79.09 (strike less premium paid).

More broadly speaking, call buyers have been unusually active in recent weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Skyworks Solutions stock's 10-day call/put volume ratio of 5.11 arrives in the 97th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.  

Whether it's puts or calls, Skyworks Solutions options premiums are pricing attractively priced at the moment, from a volatility standpoint. Specifically, the stock's Schaeffer's Volatility Index (SVI) of 31% ranks in the 16th percentile of its 12-month range, meaning near-term options have priced in lower volatility expectations just 16% of the time in the past year.

Looking closer at the charts, today's downside is being contained near in the $79.40-$80.00 range. The lower end of this region coincides with a 38.2% Fibonacci retracement of the chip stock's surge from its Aug. 28 low at $71.51 to its Sept. 12 peak at $84.35, as well as its 50-day moving average. Year-to-date, SWKS is still up 19.5%.

swks stock daily price chart on sept 26


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