Option Traders Bet Big on Semiconductor Stock

Meanwhile, Deutsche Bank slashed its price target

Deputy Editor
Mar 27, 2020 at 2:34 PM
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ON Semiconductor Corp (NASDAQ:ON) is following the rest of its sector peers back down the charts today, right on the heels of a big win for chipmakers yesterday. The stock is down 7.1% to trade at $13.10 at last check, with a price target cut from Deutsche Bank to $22 from $26 hardly helping matters. Today's dip puts ON's year-to-date loss at 46%, though the chip concern is eyeing a 21.7% win for the week. 

Sentiment surrounding ON is split. Ten of the 21 analysts in coverage call the equity a "strong buy," while the other 11 say "hold" or worse. It's 12-month consensus price target of $20.78, on the other hand, is a hefty 56.2% premium to current levels. 

ON's typically quiet options pits are buzzing with activity today, with 4,614 calls across the tape so far -- four times what is typically seen at this point. According to data from Trade-Alert, it looks like most of this activity can be attributed to two 2,000-contract calls purchased the October 18 and 19 strikes, with positions being opened at the latter. If this is the case, ON will need to add over 37% for the trader to profit. 

Looking more broadly, interest in puts is starting to pick up. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ON Semiconductor sports at 10-day put/call ratio of 0.79, which sits in the 85th percentile of its annual range. This means that while calls are still outnumber puts at an overall basis, there has been an uptick in interest for these bearish bets of late. 

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