Options Traders Target Tumbling Semiconductor Stock

Options volume is running at six times the intraday average

Assistant Editor
Aug 18, 2021 at 3:34 PM
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Cree Inc (NASDAQ:CREE) is down 9.3% to trade at $78.30 at last check, despite the company reporting narrower-than-expected fiscal fourth-quarter losses, which beat Wall Street's estimates by 1 cent. However, revenue missed the mark, leading the company to lower its first-quarter revenue outlook below estimates. In response, Piper Sandler and BMO both cut their price targets to $80 from $110, while CRFA lowered its price objective to $90 from $110. 

Today's plunge has CREE trading at its lowest level since November, and looking to close below the 320-day moving average for the first time since May 2020 -- after the equity yesterday dipped below the trendline before settling above it. Year-to-date, the security is down 25.1%. It's also worth noting that the stock has been placed on the Short Sale Restricted (SSR) list after today's sharp drop.

CREE 0818

This negative price action has prompted a surge of options activity. So far, 16,000 calls and 7,366 puts have crossed the tape, or six times the intraday average. Most popular by far is the August 80 call, where new positions are being opened. Though calls are more popular on an absolute basis, put volume is running at its highest annual percentage.

Puts have been seeing similar popularity of late. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CREE's 50-day put/call volume ratio of 0.83 stands higher than 98% of readings from the past year. This shows long puts being picked up at a much faster-than-usual rate over the last 10 weeks. 

A short squeeze could provide some tailwinds for the security, as short interest makes up 11.9% of the stock's available float. It would take over 12 days to buy back these bearish bets, at CREE's average pace of trading. 

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