Wolfspeed Plummets 18%—What’s Driving the Freefall?

• WOLF stock crashed 18.24% to $1.30, hitting a session low of $1.25
• Filed Chapter 11 bankruptcy after $4.6B debt restructuring
• 52-week range spans an extreme $0.39 to $25.20

Today’s collapse marks a brutal divergence from sector peers as Wolfspeed grapples with restructuring pressures and a 49.6% short interest rate. The stock now trades near historic lows despite a $5.34 12-month analyst target.

Bankruptcy Filing Ignites Liquidation Panic
The catastrophic selloff traces directly to Wolfspeed’s Chapter 11 bankruptcy filing disclosed earlier this month. The $4.6 billion debt restructuring and appointment of a new CFO failed to reassure investors, with short sellers aggressively adding positions. Technicals worsened as volume spiked to 12 million shares—double the 30-day average—indicating forced unwinding of leveraged positions. The KDJ Death Cross at oversold levels initially hinted at a short-covering bounce, but fundamental fears overwhelmed any technical optimism.

Semiconductors Stabilize as Wolfspeed Crumbles
While WOLF tumbles, broader semiconductor peers like NVDA (+0.6%) and TSM (+1.2%) show resilience. Sector leader NVIDIA’s AI-driven rally contrasts sharply with Wolfspeed’s bankruptcy-driven chaos. Even China’s SMIC, under U.S. export scrutiny, outperformed with a 2% gain. This divergence highlights Wolfspeed’s isolated crisis amid a sector recovering from inventory overhangs.

Bearish Options Dominate as WOLF Hits Support
Bull Put Spread and Out-of-the-Money Puts dominate actionable trades:
• 200-day MA: $6.09 (far above current price)
• RSI: 59.84 (neutral)
• Bollinger Bands: Currently at $1.13 midline

Focus on $1.25-$1.50 support cluster. Aggressive traders might consider:
1. WOLF20250919C1.5 (Call, Sep 2025):
- IV: 197%
- Delta: 0.61
- Gamma: 0.34
- Turnover: 8,654
- Why? High volatility capture with 3.42% leverage. Theta decay (-0.0033) accelerates value erosion, ideal for near-term rebounds.
2. WOLF20260320P1.5 (Put, Mar 2026):
- IV: 275%
- Delta: -0.14
- Gamma: 0.07
- Turnover: 1,776
- Why? Long-dated protection with 1.17% leverage. Theta (-0.0011) and gamma provide volatility upside.

Payoff Example: At $1.24 (5% drop), Puts yield $0.26 intrinsic value. Monitor $1.20 psychological support—failure risks $1 handle clearance.

Trading Hook: "Bulls betting on restructuring success should target WOLF20250919C1.5 below $1.50, but stop losses are critical at $1.15 support break"

Backtest Wolfspeed Stock Performance
The backtest of WOLF's performance after a -18% intraday plunge reveals mixed results. While the 3-day win rate is 45.69%, indicating a higher probability of a positive return in the short term, the 10-day and 30-day win rates drop to 40.26% and 29.39%, respectively. This suggests that while WOLF may bounce back in the immediate aftermath of the plunge, longer-term returns are less certain. The maximum return during the backtest period was -0.09%, which occurred on day 0, implying that the stock narrowly avoided further losses but did not recover positively in the short term either.

Bankruptcy Uncertainty Demands Caution
Wolfspeed’s freefall underscores existential risks from its debt restructuring. While GF Value estimates imply 2,427% upside, the near-term outlook remains hostage to Chapter 11 proceedings and delisting threats. Investors should prioritize risk management—focus on puts for downside protection and monitor $1.20 support. Sector leader NVIDIA’s 0.6% gain highlights the stark contrast between healthy peers and WOLF’s crisis. Action Alert: Avoid long exposure until post-bankruptcy clarity emerges—this is a short squeeze waiting for a catalyst (or a final collapse).