Credo Technology Options Surge After Stock Plunge, Signaling Hedging and Rebound Bets

Options volume in Credo Technology Group Holding Ltd. (CRDO) surged Wednesday after the stock plummeted following its latest earnings report. The activity points to a complex mix of downside hedging and speculative bets on a near-term rebound, rather than a straightforward bearish outlook.

Post-Earnings Selloff Sparks Options Frenzy

Credo's stock was trading down approximately 18% to around $168.35 in midday trading on Wednesday, September 2. According to a report from Investing.com, the sharp decline followed an earnings release where strong results were overshadowed by investor concerns about gross-margin compression and the pace of its optical product ramp.

In response, total options volume climbed to over 62,200 contracts, with puts slightly outnumbering calls. This resulted in a put/call volume ratio of 1.16, a figure that often indicates hedging activity after a significant price drop rather than aggressive bets on further declines.

Traders Establish Fresh Positions

A key feature of the trading session was that volume in several options contracts significantly exceeded their prior open interest, signaling that traders were opening new positions rather than closing existing ones. It is important to note that volume data does not distinguish between contracts being bought or sold.

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Notable activity included:

• Downside Protection: Significant volume was seen in the September 18 $160 puts, a near-term hedge against further losses, and the October 16 $115 puts, which could represent tail-risk protection.
• Rebound Speculation: On the call side, heavy trading occurred in the September 4 $180 and $185 calls, suggesting some traders are positioning for a quick bounce before the contracts expire in just two days.

Volatility and Skew Offer Cautious Tone

Counterintuitively, three-month implied volatility for Credo fell by 9.36 percentage points to 72.11% even as the stock price plunged, according to data cited by Investing.com. This dynamic suggests that the market may have absorbed the initial shock from the earnings news and is not pricing in escalating volatility from current levels.

Furthermore, the options skew—which measures the relative demand for puts versus calls—remained nearly flat. The lack of a dramatic premium for downside puts reinforces the view that the market is engaged in cautious repositioning and repricing of risk, not panicked selling.