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The $1 million bet against semiconductor stocks

Options Action: 'Chip'-wreck

Semiconductor stocks took a tumble Tuesday, and one trader is betting big on even more losses ahead for the space.

The semiconductor ETF, SMH, fell almost 2 percent Tuesday, leading the fund into negative territory for the year. On Monday, one trader bought 10,000 of the December 54/50 put spreads for $1 each. This is a $1 million bet that SMH falls as low as $50 by December expiration.

A move to $50 would be another 7 percent drop from where SMH traded Tuesday morning.

"This is a bet that we could retrace these lows here in just 39 days," CNBC contributor Mike Khouw said Monday on "Fast Money," looking back to September levels.

Among the biggest losers in the on Tuesday were SMH holdings Skyworks Solutions and Avago Technologies, down 5 and 4 percent, respectively. Both are suppliers for Apple, which also dropped on a Credit Suisse report that the tech giant is cutting iPhone production.

Read MoreCredit Suisse: Apple cutting iPhone production orders by 10%

Intel, Taiwan Semiconductor Manufacturing and Qualcomm, the top three holdings in the ETF, were all down Tuesday as well.