Options Bears Rush Struggling Semiconductor Stock

Puts are running at six times their intraday average

Assistant Editor
Aug 12, 2021 at 3:38 PM
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The shares of Western Digital Corp (NASDAQ:WDC) are down 6.8% to trade at $62.18 at last check, falling alongside sector peer Micron Technology (MU), after Morgan Stanley downgraded MU, citing future weakness in the chip sector, specifically in dynamic random-access memory (DRAM) prices. 

On the charts, the stock earlier dipped below the 200-day moving average for the first time since November. The $60 level, which the equity bounced off earlier this month, helped contain today's pullback. Year-to-date, WDC is up 12.4%. 

WDC 0812

Meanwhile, the security is being bombarded with bearish options activity. So far, 35,000 puts have crossed the tape -- six times the intraday average -- with volume running in the top percentile of its annual range -- compared to 20,000 calls. Most popular by far is the weekly 8/27 58-strike put, where new positions are being bought to open. 

The majority of analysts are bullish on Western Digital stock. Of the 19 in coverage, 15 carry a "buy" or better rating, with four a tepid "hold." Plus, the 12-month consensus price target of $92.78 is a 49.1% premium to current levels. 

Lastly, now looks like a good time to weigh in on the WDC's next move with options. The stock is seeing attractively priced premiums at the moment, per the equity's Schaeffer's Volatility Index (SVI) of 36%, which sits in just the 6th percentile of its annual range.

 

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