Now is an opportune time to speculate with XLNX options
The shares of semiconductor stock Xilinx, Inc. (NASDAQ:XLNX) gapped lower last Friday, Sept. 20, after the company said CFO Lorenzo Florez will step down, effective after second-quarter earnings are released on Wednesday, Oct. 23. What's more, XLNX stock has a history of sinking after back-to-back Fed rate cuts, though the shares could find some saving grace in the form of a key trendline.
More specifically, XLNX emerged as one of the worst stocks to own after the Fed cuts rates twice in 60 days -- something the central bank did just last week. After 10 prior signals, the security was higher one month later just 20% of the time, and averaged a one-month loss of 5.3%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.
In light of Friday's aforementioned sell-off, Xilinx stock has already exceeded its average post-Fed signal decline. More specifically, the security surrendered nearly 9% last week, and breached recent round-number support at the $100 level. However, as alluded to earlier, XLNX's downside could be limited with help from a key moving average.
The security is back within one standard deviation of its 320-day moving average, after a lengthy stretch above the trendline. Over the past three years, the stock has experienced five similar pullbacks to the moving average, after which XLNX was higher one month later 100% of the time, averaging a gain of 6.9%. From the equity's current perch at $95.98 -- down another 2.1% today -- a similar rebound would put the shares back above $102.
In any event, now is an opportune time to speculate on XLNX's short-term trajectory with options. The stock's Schaeffer's Volatility Index (SVI) of 31% is in the 26th percentile of its annual range, meaning short-term options on the security are relatively inexpensive at the moment, from a historical volatility standpoint.