Traders are betting that a key Apple supplier could face trouble when it reports after the close Wednesday.
On Tuesday, put volume on NXP Semiconductors, which make communication chips for Apple, was more than six times its average daily amount. That was a result of what appears to be a large February 77.5/70/65 put butterfly trade.
Specifically, the trader executing this strategy sold 4,000 of the February 70 strike puts for $0.80 per share each, while simultaneously buying 2,000 of the Feb 77.5 strike puts for $3 per share and another 2,000 of the February 65 strike puts for $0.50 per share. The trade is most profitable if NXP falls to $70. The trade thus cost $380,000 to put on.
"When you trade a butterfly, what you're looking for is for the stock to migrate to that middle strike, to that short strike, which would be $70," explained CNBC contributor Mike Khouw.