Sentiment has been weakening in the chip sector for the last week, and yesterday (Wednesday) the bears pounced on Lam Research.
OptionMonster's real-time tracking systems detected a surge of put buying in the company, which opened Weednesday near its highest price in more than three years.
Shares dropped steadily throughout the session and ended down 6.85 percent at $53.88, their biggest drop since July 2009. (Ticker shows today's quotes.)
Option activity was led by more than 2,400 June 50 contracts, which changed hands mostly for $2.25. The trades pushed total option volume in the manufacturer of semiconductor-production equipment to five times its daily average.
Lam had been drifting higher along with most other companies in the industry despite issuing a weak outlook the last time it reported earnings on Jan. 26. Related companies such as Applied Materials, along with their chip-making customers, have dropped sharply this month as investors get jittery about oil prices and take profits after a huge run.
The company's next earnings report is scheduled for April 18. Semiconductor stocks tend to follow expectations about the economy and usually move as a group.
Russell has no positions in any of the stocks mentioned in this article.
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David Russell is a reporter and writer for OptionMonster.