Options Traders Targeting CREE, SDC with Gusto

Premium on both CREE and SDC can be had for cheap

Managing Editor
Dec 18, 2019 at 1:45 PM
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Two names stand out when digging through today's options activity. First up is chip manufacturer Cree, Inc. (NASDAQ:CREE), which is up 2.6% to trade at $47.44. At last check, already over 11,000 calls have changed hands, 11 times the expected intraday amount and almost 12 times the number of puts traded.

Most of this action is occurring at the December 47 call, where new positions are being opened. There are also new positions being opened at the weekly 12/27 47-strike call and January 2020 50-strike call.

Amid limited absolute volume, this preference for calls is nothing new. According to data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Cree has a 10-day call/put volume ratio of 7.01. This ratio ranks in the 90th percentile of its annual range, indicating this rate of call buying relative to put buying is unusual.

Then there's teledentistry name SmileDirectClub Inc (NASDAQ:SDC), which was last seen down 0.2% at $7.78. Perhaps due to the troubled 2019 newcomer's 53% year-to-date deficit, puts are quite popular today. 

More than 2,500 puts have traded today, double the expected intraday amount and four times the number of calls traded. Nearly all of this activity is occurring at the January 2020 7.50-strike put, where some traders are selling their positions. This indicates options traders are looking at the $7.50 level serving as a floor in the coming months.

It also should be noted that both CREE and SDC sport attractively priced options. The stocks' Schaeffer's Volatility Indexes (SVI) of 35% and 75% respectively sit near the bottom percentile of readings from the past year.

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