Cypress Semiconductor Seeing a Top?

Feb.22.10 | About: Cypress Semiconductor (CY)

by David Russell

Cypress Semiconductor (NASDAQ:CY) surged to its highest level since the dot-com bubble last week, but traders seem to think that the shares are topping out.

optionMONSTER's tracking programs detected the sale of 7,578 June 13 calls for $0.80 against open interest of 1,252 contracts. Separately, 2,500 April 13 puts were bought for $1.20 to $1.25 against no existing open interest.

CY Chart

CY fell 0.41 percent to $12.25 in morning trading and is up 15 percent in the last month. Last week it reached $12.46, the highest price recorded since September 2000.

The chip company issued a better-than-expected outlook on Jan. 28, marking at least the third straight earnings report it guided above analysts' estimates.

However, given CY's recent gains and the emerging weakness in technology, traders seem to think that it's time to take money off the table. The large call sale reflects a belief the stock will remain above $13.80 through June 18. It may have been executed by a trader who owns the shares or as an outright bearish bet.

The put transaction is designed to benefit from a push to the downside. By purchasing in-the-money contracts, the trader obtained a higher delta and will make money if CY falls below about $11.75.

There was also a sale of 1,200 April 11 puts for $0.35, which reflects a belief that the stock will remain above $10.65 through expiration.

Overall options volume in CY was about five times greater than average, with puts outnumbering calls by 2 to 1.

(Chart courtesy of tradeMONSTER)