Lam Research Sees 80,000-Contract Put Spread

Someone just bought a lot of downside protection on Lam Research.

Options activity in LRCX spiked Friday with over 83,000 put contracts traded—ten times the average daily put volume. Nearly all the action concentrated in a single March 2026 put vertical spread, with a trader rolling up their hedge on what appears to be a $2.5 billion equity position.

The Trade Structure

The flow shows a 25,000-contract March 2026 put roll.

A trader bought the $200/$170 put vertical 40,000 times—that's 80,000 total contracts representing exposure to 8 million shares. At Lam's current price near $180, that's roughly $1.44 billion in notional protection.

The spread was executed for a $7.28 net debit. Buying the $200 put while selling the $170 put creates a defined-risk bearish position that profits if LRCX falls below $200 by March expiration and maxes out at $170.

This appears to be one-to-one stock protection. The investor likely owns 2.5 million shares of Lam Research and is re-hedging their position by rolling up from a lower strike. The roll reduces downside exposure to $170 through March.

Why Now?

The timing aligns with semiconductor sector uncertainty.

Lam Research rallied 49% in 2025, outperforming the broader chip complex. But the stock now trades at 36x forward earnings—well above its three-year average. At that valuation, any disappointment in the memory capex cycle could trigger a sharp correction.

Intel's 17% plunge Friday demonstrated how quickly sentiment can shift in semiconductors. Lam wasn't directly affected—it actually rose slightly—but the sector's vulnerability to guidance misses is elevated.

The March expiration gives the hedge coverage through Q1 earnings season. Lam reports in late January, and any weakness in memory equipment orders or WFE (wafer fab equipment) spending forecasts could pressure the stock.

Reading the Intent

This is protective positioning, not a directional bet.

When a trader buys put spreads in size while apparently owning the underlying stock, they're not betting on a crash. They're buying insurance. The $7.28 cost represents roughly 4% of the position value—a reasonable premium for three months of protection with $30 of defined downside coverage.

The structure also tells you something. By selling the $170 put, the trader accepts that they won't be protected below that level. That's a 5% haircut from current prices. They're hedging against a moderate pullback, not a disaster.

For context on sector dynamics, chip equipment stocks have benefited from AI-driven spending. But the sustainability of that demand is increasingly questioned as hyperscalers scrutinize returns on their data center investments.

What to Watch

Lam Research's valuation leaves little room for error.

The stock has 27 Buy ratings, 7 Holds, and 1 Sell with a consensus price target of $200.52—roughly 11% upside from current levels. But analyst optimism doesn't protect against multiple compression if the memory cycle disappoints.

TSMC's recent results showed robust AI chip demand, which is bullish for equipment suppliers. The question is whether memory equipment spending—Lam's core business—follows the same trajectory.

Traders watching LRCX should note the elevated put activity. When institutional investors hedge at this scale, they're seeing risk that retail investors might miss. That doesn't mean the stock will fall—it means smart money is paying for protection just in case.

The March $170/$200 put spread defines the battleground. A break below $170 would represent a significant technical breakdown. Holding above $200 would likely trigger hedge unwinds and potential short covering.

For now, the message from options flow is clear: someone large is bullish enough to own millions of shares but cautious enough to hedge them aggressively.