Semiconductors have had a nice run, but one investor is looking
for a pullback.
optionMONSTER's Depth Charge tracking system detected the purchase
of 5,700 February 30 puts on the Semiconductors HOLDRS (
) exchange-traded fund for $0.50. The same number of February 27
puts was sold simultaneously for $0.15. Volume was above open
interest in both strikes.
The SMH is up 0.37 percent to $32.64 in morning trading but has
been falling since hitting a key resistance level from May 2008 six
days ago. The fund, whose holdings include Texas Instruments,
Intel, and Applied Materials, has rallied 23 percent in the last
three months, more than twice the performance of the broader
Today's option strategy, known as a bearish put spread, cost $0.35
to implement and will earn a maximum profit of about 750 percent if
SMH closes at or below $27 on expiration. That would mark a return
to levels where it traded in late September.
Interestingly, we have recently been seeing strength in software
companies such as Oracle, Microsoft, Adobe, and BMC Software. Some
investors may be looking to shift money from chipmakers to software
companies, which haven't rallied as much.
Overall option volume in SMH is 4 times greater than average so far
today, with puts outnumbering calls by 7 to 1.
(Chart courtesy of tradeMONSTER)
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