After a two-month rally, looks like semiconductor shares' bullish streak may have short-circuited. Investing hopes were high that the Fed's second round of quantitative easing would offer a pick-me-up to flailing electronic sales. But the recent decline in memory chip prices suggests that government stimulus may not be enough to reboot the industry.

Because memory chips can take as long as three months to produce, they're among the first hardware components ordered by electronics companies. For this reason, investors can use chip orders and prices as an early indicator of demand.

Falling prices signal a product surplus -- meaning that sales are less than likely to meet initial estimates this quarter. And don't count on any Christmas miracles to turn the slump around. Tristan Gerra, analyst for San Francisco-based Robert W. Baird, expects the downward trend to continue to the end of the year, and "we haven't seen the worst."

So which semiconductor stocks may be on the fritz? To see which shares are expected to see a decline, we had a look at what the options traders were thinking.

Call options traders look for stocks expected to see upward momentum over the coming weeks, where put options traders do the opposite, and bet on a stock's downside. A stock seeing a high number of puts relative to calls indicates generally bearish sentiment in the options market.

And since options traders tend to be a pretty savvy lot of investors, it's not a bad idea to take their outlook into consideration before you make your next trade.

Here are the nine semiconductor companies with the highest put/call ratios. Options data sourced from Schaeffer's Research.

Options traders expect these semiconductor stocks to hit the skids -- but what do you think? (Click here to access free, interactive tools to analyze these ideas.)

Company

Call Open Interest (No.  Contracts)

Put Open Interest (No.  Contracts)

Put/Call Ratio

Standard Microsystems (Nasdaq: SMSC)

226

2,012

8.90

Micrel (Nasdaq: MCRL)

278

1,498

5.39

International Rectifier (NYSE: IRF)

1,416

6,531

4.61

Cabot Microelectronics (Nasdaq: CCMP)

1,247

5,332

4.28

CEVA (Nasdaq: CEVA)

77

324

4.21

MKS Instruments (Nasdaq: MKSI)

1,396

5,787

4.15

ASML Holding NV (Nasdaq: ASML)

3,934

14,571

3.70

Fairchild Semiconductor International (NYSE: FCS)

2,719

9,957

3.66

Cymer (Nasdaq: CYMI)

1,699

5,533

3.26

Interactive Table: Press Play to see how annual returns have fluctuated over the past two years ...


Disclosure: Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

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