Will CSCO Slowdown Keep The Lid On Semiconductor Networking Stocks?
The volatility
in Cisco
(
CSCO |
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PowerRating) options is getting whacked, as the near-term
November 55 options has fallen to 58%, while the December is hanging at 59%. The
55-calendar spread is widening out to 2 1/8 and as time goes by (sounds like a
song doesn’t it?) the juice should really come out of the November’s in a
hurry.
We focused on some of Cisco’s
component suppliers, as shares of Galileo Tech
(
GALT |
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PowerRating), Applied
Micro Circuits
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AMCC |
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PowerRating) and PMC Sierra
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PMCS |
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PowerRating) were
exceptionally volatile and active.
PMCS’s normal option volatility is 92%, while today’s implied spiked
up to 114% for November and 110% for December. Meanwhile, GALT option
volatility averages 100% and has pumped up to 125%. Lastly, AMCC 3-month
average volatility is 107% and near-term is up to 115%.
Given that AMCC has broken its 200-day MA of 68 3/16, a move to $50 is a
distinct possibility. A relatively cheap shot at such a meltdown for traders would be
a purchase of the December 67 ½ – 60 put spread for $3. The put bear-spread helps
negate the volatility surge and will give them time to see how the peripherals shake
out.