Are More Losses Ahead for Sinking QLogic Corporation (QLGC)?

Unlike the broader equities market, QLogic Corporation (NASDAQ:QLGC) is sinking today. Specifically, the shares are off 21.5% at $10.98 -- and on pace for their worst day in more than 15 years -- after the company drastically reduced its outlook for the fiscal first quarter, citing weak demand in server and storage markets, and a build-up in inventories for several of its customers. Against this backdrop, the stock has been placed on the short-sale restricted list, and put volume is running at 28 times what's typically seen at this point in the day.

From a broader sentiment perspective, speculators have shown a preference for calls over puts among options set to expire in three months or less. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.15 ranks lower than 78% of all similar readings taken in the past year. Simply stated, speculative traders are more call-skewed than usual toward QLGC.

Drilling down on the front-month series, peak call open interest is found at the July 15 strike, where 2,353 contracts are currently in residence. According to the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the majority of contracts initiated here in recent months have been of the buy-to-open variety, meaning speculators have been betting on QLGC to be sitting north of $15 at next Friday's close -- when the series expires. Thankfully, the most any option buyer has at risk is the initial premium paid.

Elsewhere on the Street, analysts have been upbeat toward the stock. Of the seven brokerage firms covering QLGC, five maintain a "buy" or better rating, with not a single "sell" to be found. Plus, the average 12-month price target of $16.92 stands at a 54% premium to current trading levels -- and sits in territory not charted since May 2012.

Heading into today's session, the stock was sporting an impressive 36.3% year-over-year advance. Since hitting a three-year high of $15.93 in early June, though, the shares have been losing ground -- and are down 31%. Should QLogic Corporation (NASDAQ:QLGC) continue to move south, a shift in sentiment among option traders and/or analysts could bring a fresh wave of selling pressure.