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Bullish Semiconductor Options Trades Suggest Trade War Fears Might Be Overblown

Bullish Semiconductor Options Trades Suggest Trade War Fears Might Be Overblown

The iShares S&P NA Tec. Semi. Idx. Fd. (NASDAQ: SOXX) ETF has bounced back in the past week, gaining 5.3 percent after a trade war sell-off in May.

Semiconductor stocks were certainly on at least one large option trader’s radar on Tuesday morning, but the mixed trades suggest semiconductor investors buying the dip should be selective.

The Trades

On Tuesday morning, Benzinga Pro subscribers were alerted to a series of four unusually large semiconductor option trades.


The first Tuesday trade at around 9:30 a.m. was a purchase of 1,000 Marvell Technology Group Ltd. (NASDAQ: MRVL) call options at an $24 strike price that expire on Friday. The calls were purchased at the ask price of $1.121 and represent a $112,100 bullish bet at a break-even price of $25.121. The price suggests 1.5 percent upside for Marvell within the next four months.


The next trade occurred almost simultaneously. Potentially the same trader bought 678 Jan. 17, 2020 $35 Advanced Micro Devices, Inc. (NASDAQ: AMD) calls at the ask price of $4.85. The trade represented a $328,830 bullish bet at a break-even price of $39.85.


About four minutes later, a trader sold 615 QUALCOMM, Inc. (NASDAQ: QCOM) call options at an $73 strike price that expire on June 21. The calls were sold at the bid price of 99 cents and represent a $60,885 bearish bet.

About an hour and a half later, a trader sold 5,000 July 19 $67.50 Qualcomm puts at the bid price of $1.50. The trade represented a $750,000 bullish bet, the largest semiconductor option trade of the morning.


At 11:13 a.m., a trader bought 2,400 Jan. 17, 2020 $24 Micron Technology, Inc. (NASDAQ: MU) puts at the ask price of 89.1 cents. The trade represented a $213,840 bearish bet.


Finally, at 11:24 a.m., a trader sold 508 July 26 $72.50 Skyworks Solutions Inc (NASDAQ: SWKS) puts at the bid price of $3.10. The trade represented a $157,480 bullish bet.

All together, option traders made about $1.384 million in bullish options trades on semiconductor stocks and $274,725 in bearish trades on Tuesday morning.

Even traders that focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking. Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advanced information on a given stock.

Trade War Troubles Overblown?

Bank of America said last month U.S. tech stock buyers should specifically avoid the semiconductor space in the near term due to trade war concerns. Many of these semiconductor stocks have heavy exposure to China, but Tuesday’s option trading action suggests some investors with deep pockets are betting that the market’s trade war pessimism is overdone.

In particular, the largest bullish bets on Qualcomm and AMD came in contracts that expire on July 19, 2019 and Jan. 21, 2020, respectively. These traders could be betting that the U.S. and China make positive steps toward a trade resolution at the upcoming G20 Summit on June 28-29.

Unfortunately, there’s no way to be 100 percent certain whether the buys are a standalone position or a hedge against a larger stock holding. Given the relatively modest size of most of the Tuesday morning trades, they are unlikely to be hedges in this instance.

Related Links:

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