Cypress Semiconductor is putting in a double bottom around
$9.80, and now one big investor is betting on a long-term
optionMONSTER's Heat Seeker tracking program detected the sale of
11,895 January 2012 7.50 puts for $0.87 and $0.88, matched against
the purchase of an equal number of January 2012 12.50 calls for
$1.60. The transaction resulted in a net cost of $0.725 and pushed
total options volume in the stock to 16 times greater than
CY rose 6.02 percent to $10.57 on Friday after trading as low as
$9.73 in the session, slightly below the $9.80 level where it
bottomed out at the beginning of last month. The company, whose
chips are used in devices ranging from computers to home
appliances, reported better-than-expected earnings and revenue on
The stock rallied briefly on the news but since then has been
dragged lower by amid the bigger negative trend in technology and
semiconductor shares. On its last earnings call, CY also issued
guidance for the third quarter that was above forecasts.
Friday's trade will simulate a long position in the stock,
delivering leveraged gains if it pushes above the $13.20 area by
expiration. It neither make nor lose money beyond the premium
already invested if CY remains between $7.50 and $12.50, but
generate additional losses below the bottom of that range.
The activity in was similar to trading at about the same time in
ON Semiconductor, which also saw long-term put selling and call
buying. Both occurred after chip giant Intel cut its guidance amid
weak PC demand and then rebounded from its own 52-week low. The
development may have been so inevitable bad news that the market
has been gradually pricing into the sector recently, signaling that
now the coast is clear for buyers to return.
This morning, the Semiconductor Industry Association said
worldwide chip sales rose 1.2 percent in July from June, led by
gains in the Americas while Asia was little changed.
(Chart courtesy of tradeMONSTER)
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