Thursday Options Brief: PAY, RFMD & SWKS

Includes: PAY, QRVO, SWKS
by: Interactive Brokers

PAY - VeriFone Systems, Inc. - VeriFone's lower-than-expected forecast for second-quarter earnings sent shares in the provider of electronic payment systems down nearly 40% to the lowest level since July 2010 on Thursday morning, and drove options volume on the stock to roughly four times its daily average by 11:35 a.m. ET. The total number of call and put options in play on VeriFone this morning at last check tops 24,400 contracts versus the stock's average daily volume of around 6,100 contracts. Analysts at Deutsche Bank, Raymond James, Citi, JPMorgan and Piper Jaffray downgraded and/or lowered price targets on the stock today. Trading traffic in PAY call options suggests some contrarian traders are positioning for shares to potentially rebound somewhat in the near term. Options traders nibbling at upside calls picked up around 600 lots at the Mar. $22 strike for an average premium of $0.55 apiece in the early going. Call buyers may profit at expiration next month in the event that VeriFone shares jump 16% off today's low of $19.43 to exceed the average breakeven price of $22.55. Around 360 calls were purchased at the higher Mar. $23 strike at an average premium of $0.29 apiece, as well. Meanwhile, hefty paper profits may be available for one strategist who appears to have sold around 500 Mar. $34 strike calls on Wednesday afternoon ahead of today's selloff. Time and sales data indicates the call options were sold at a premium of $1.05 apiece yesterday, contracts that can now be bought back at just $0.05 each.

RFMD - RF Micro Devices, Inc. - Bearish options are changing hands on the semiconductor components manufacturer today, with shares in RF Micro Devices tumbling on a downgrade to 'Market Perform' from 'Outperform' at Raymond James on concerns of increased competition from Qualcomm, amid a down day for U.S. stocks across the board. Shares in RF Micro Devices are down more than 13% as of midday in New York to stand at $4.49. Traders positioning for shares in RFMD to extend losses during the next few weeks snapped up in-the-money put options, buying around 2,500 Mar. $5.0 strike puts at a premium of $0.25 each during the first 15 minutes of the trading session. Options players long the puts at a cost of $0.25 per contract have seen the value of these options double during the past few hours, with premium on the $5.0 strike puts up at $0.60 as of 12:30 p.m. in New York.

SWKS - Skyworks Solutions, Inc. - Like RF Micro Devices, shares in Skyworks Solutions are down more than 13% today, tumbling to a one-month low of $20.40 following a downgrade to 'Outperform' from 'Strong Buy' at Raymond James that highlights concerns of increased competition from Qualcomm. Traders bracing for further declines in Skyworks snapped up front month put options today. Bears picked up around 1,000 in-the-money put options at the Mar. $22 strike at an average premium of $1.22 each, and some 1,300 puts at the Mar. $21 strike for an average premium of $0.71 apiece. Traders long the put options stand ready to profit at March expiration should shares in SWKS settle below average breakeven prices of $20.78 and $20.29, respectively. Put premium has increased substantially over the average price paid this morning, with the price tag on the $22 strike puts up 35% at $1.65, and the asking price on the $21 puts up 55% at $1.10 as of 1:00 p.m. ET. Overall options volume on Skyworks is up sharply versus the stock's average daily level, with more than 20,000 call and put options in play as compared to average daily volume of around 3,500 contracts.

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