Cree (CREE, $61.85, down $13.91) shares are down 18% and have dipped below $60 to $59.87 today after lowering guidance.
The company reported earnings after the close on Tuesday that matched Wall Street’s estimates for the most part but lowered current quarter guidance. Earnings per share came in at $0.38 but revenue of $375 million missed forecasts for $377 million. Cree said earnings for the current quarter are expected to come in at $0.36-$0.41 a share versus estimates for $0.43 a share from the suit-and-ties.
We have traded Cree options in the past and we highlighted its earnings report in our Weekly Wrap but shares didn’t make it to our Watch List. In the past, we have played put options on Cree and put the premiums are usually a little inflated because it is a high beta stock.
For instance, the August 70 puts (CREE130817P00070000, $9.21, up $8.30) were at 91 cents before Tuesday’s close but have zoomed over 900% today. These options were $5 out-of-the-money and the $1 premium was a little much on options that expire in 3 days. However, the trade would have been a nice lottery play.
The Cree September 70 puts (CREE130921P00070000, $9.15, up $6.86) were pushing $2.30 into Tuesday’s close and are up nearly 300% and have traded up to $10.50.
Cree is still a great stock to trade and now that earnings have played out, the premiums in the options should trade closer to normal levels. We will check the chart over the weekend to see if there will be a rebound of further slide.
As far as the market, the bears are once again pushing support after the bulls failed to gain footing at the open. Some of the indexes have tripped green but as we head into the second half of trading, we are looking at a sea of red.
The Dow is lower by 76 points to 15,374 while the S&P is down 5 points to 1,688. The Nasdaq is off 3 points to 3,681 and the Russell 2000 is declining by a deuce to 1,049.
We said earlier in our Profit Alert we were builing out our next batch of trades and we have another one we are adding as we type. Subscribers, check the Members Area for New Trade the updates for our current ones.
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