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Why one large bear is stalking Verigy

Verigy popped on a takeover bid in December, but one option strategy is positioning for a drop.

optionMONSTER's Depth Charge tracking system detected the purchase of 5,000 April 13 puts for $1 and the sale of 5,000 April 11 puts for $0.25, resulting in a net cost of $0.75. The trade, known as a bearish put spread, will earn a maximum profit of 167 percent if the semiconductor-equipment stock closes at or below $11 on expiration.

VRGY rose 0.62 percent to $13 in late morning trading. It gapped from the $9 area to around $13 on Dec. 6 after disclosing that Advantest made an unsolicited buyout offer of $12.15 a share, which was then raised to $15 later in the month.

VRGY reported a narrower-than-expected loss on Feb. 24, but revenue guidance was below expectations.

Today's put spread reflects worry that VRGY will drop in the next two months. It may be a hedge by a merger-arbitrage investor who owns the stock, betting that the takeover bid will be accepted at $15.

Overall option volume in VRGY is 11 times greater than average so far today, with puts accounting for a bearish 98 percent of the total.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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