MRVL – Marvell Technology Group Ltd. – Bearish options trading strategies observed on the semiconductor maker late in the session on Monday were replicated on Tuesday with shares of the underlying stock continuing to descend. Marvell’s shares are currently down 4.10% to stand at $16.43 as of 12:07 pm (ET). MRVL’s shares have fallen more than 15.5% since touching an intraday high of $19.45 on Monday June 21, 2010. Pessimistic options players positioning for shares to head lower by expiration day next month sold 1,200 calls at the July $17 strike for an average premium of $0.38 apiece. If investors are selling the calls outright, as opposed to throwing in the towel on a previously established long call position, the full premium received today is theirs to keep as long as MRVL’s shares fail to rebound above $17.00 by July expiration day. Alternatively, traders may be ditching bullish positions on the stock today to take in whatever rapidly shrinking premium on the out-of-the-money calls they can get. Call selling spread to the August contract where options players sold 1,100 lots at the August $17 strike for an average premium of $0.82 each. Bearish individuals also sold 1,200 in-the-money calls at the August $16 strike for approximately $1.37 per contract. Ultra-pessimistic traders shed 1,100 August $15 strike call options to take in an average premium of $1.99 apiece. Investors enacting outright bearish bets on Marvell walk away with the premium pocketed on the sale of the call options if the shares of the underlying stock trade below the strike prices described through expiration day in August. If traders are merely closing out long call positions, they could be suffering net losses on the sale of the contracts depending on the price initially paid to buy the calls. Contrarian strategies were also observed on MRVL today, although such trading represented the minority of activity on the stock. Investors expecting shares to exceed $16.00 through July expiration sold 2,300 puts at the July $16 strike to take in an average premium of $0.52 per contract. Put sellers at this strike keep the full premium as long as the puts land out-of-the-money at expiration. But, if the puts are in-the-money at expiration, investors short the puts are obliged to have shares of the underlying stock put to them at an effective price of $15.48 each. Options implied volatility on Marvell Technology Group Ltd. is up 8.10% to 44.43 as of 12:25 pm (ET).
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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