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Today, we’re opening a new bearish trade on Skyworks Solutions (SWKS). The Apple (NASDAQ:AAPL) report wasn’t bad, but it revealed a persistent margin problem within the sector. Generally, it’s safe to assume that if the biggest company in the market is seeing margin compression, then they are doing their best to pass that along to their suppliers as well.

Because of that, we have been surprised that companies like SWKS haven’t already sold off their highs. It seems obvious from AAPL’s report (not to mention Samsung, and LG’s smartphone slowdowns) that suppliers like SWKS are a little overbought. We think this gives us an opportunity to the downside as investors adjust the premium before (or potentially just after) earnings next week.

Buy to open the SWKS November 77.50 Puts (SWKS161118P00077500).

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