Bearish Player Targets Verigy Ltd. Put Options

Today’s tickers: VRGY, AEO, FAST & XLK VRGY  - Verigy Ltd. –  A sizable put spread on the maker of chip-testing equipment suggests one option strategist is prepared for shares in Verigy Ltd. to drop ahead of April expiration. Shares in Singapore-based Verigy are currently up 0.85% to stand at $13.03 perhaps after analysts at JPMorgan upgraded the semiconductor sector to ‘constructive’ from ‘cautious.’ Verigy looked to acquire LTX-Credence Corp. back in November in an all-stock deal that valued its takeover target at $500 million including net debt, but those plans may fall through as Japanese chip-testing equipment giant, Advantest Corp., extended its own offer to acquire Verigy at a substantial premium of $15.00 a share, up from an original bid of $12.50 a share, at the end of last year. The merger of Verigy and Advantest would form the largest manufacturer of semiconductor testing equipment in the world. Perhaps the put player populating Verigy today is prepared to see shares in the name drop if the deal with Advantest ultimately falls through in the next six weeks to April expiration. The investor purchased 5,200 puts at the April $13 strike for a premium of $1.00 each, and sold the same number of puts at the lower April $11 strike at a premium of $0.25 apiece. Net premium paid to initiate the spread amounts to $0.75 per contract. Thus, the trader starts making money should Verigy’s shares decline 6.00% to breach the effective breakeven price of $12.25 ahead of April expiration day. Maximum potential profits of $1.25 per contract pad the investor’s wallet in the event that shares in VRGY plummet 15.6% from the current price of $13.03 to trade below $11.00 by expiration next month. AEO  - American Eagle Outfitters, Inc. –  Call options on the casual clothing retailer are…