KLA-Tencor: Positioned for a Fall?

| About: KLA-Tencor Corporation (KLAC)

By Chris McKhann

KLA-Tencor (NASDAQ:KLAC) has been sitting right around $36 for two weeks, but new put buying shows concern about the downside.

KLAC Chart

The semiconductor equipment company currently trades at $36.09, flat on the day. KLAC has oddly hovered around this level since running up from $32 coming into the month.

Traders are apparently concerned that the stock has stalled here, as we see a chunk of institutional put buying. More than 2,500 January 37.50 puts have changed hands, 2,000 of those bought in one trade for $2.30. This is against open interest of just 310 contracts, so this in-the-money put buying is new opening positions, optionMONSTER's systems show.

Using the in-the-money puts reduces the exposure to time decay, as these puts are $1.41 in the money, so only $0.89 of the option premium is actually time premium. This type of buying is not protective and clearly looking for a way to profit from a fall in KLAC without having the risk of shorting the stock. (See our Education section)

(Chart courtesy of tradeMONSTER)