Analysis of Wolfspeed's Potential Chapter 11 Bankruptcy Filing

Breaking News Overview

According to multiple reports citing a Wall Street Journal article published on May 20, 2025, silicon carbide semiconductor manufacturer Wolfspeed (NYSE: WOLF) is preparing to file for Chapter 11 bankruptcy protection within weeks. This news sent the company's shares plummeting by over 57% in extended trading.

Key Factors Leading to Bankruptcy Consideration

1. Debt Burden: Wolfspeed is struggling to address its substantial debt pile, which totals approximately $6.5 billion. Apollo Global Management ranks near the top of this debt stack and leads a group holding $1.5 billion in senior secured loans.

2. Failed Restructuring Attempts: The company has reportedly rejected several out-of-court debt restructuring proposals from creditors and disclosed during last week's earnings that it failed to restructure its 2026 convertible notes.

3. Market Challenges: Wolfspeed has been grappling with sluggish demand in industrial and automotive markets and tariff-induced uncertainty, affecting its revenue projections and ability to service debt.

4. Revenue Shortfall: The company recently forecast weaker-than-expected annual revenue, projecting $850 million in 2026, below analysts' estimate of $958.7 million.

5. Going Concern Warning: During its recent earnings report, Wolfspeed issued a "going concern" warning, which indicates doubt about the company's ability to continue operating for the next 12 months without liquidating assets or seeking bankruptcy protection.

Previous Restructuring Efforts

Before considering Chapter 11, Wolfspeed attempted several strategies to strengthen its financial position:

1. Apollo-Led Debt Financing: In October 2024, Wolfspeed announced a consortium of investment funds led by Apollo, The Baupost Group, Fidelity Management & Research Company, and Capital Group had agreed to provide $750 million in new financing. This followed earlier debt funding of $1.25 billion led by Apollo Credit Funds in 2023.

2. Government Support: The company signed a non-binding preliminary memorandum of terms with the U.S. Department of Commerce for up to $750 million in proposed direct funding under the CHIPS and Science Act. Wolfspeed also received $192.1 million in cash tax refunds from the advanced manufacturing tax credit under Section 48D and expected more than $600 million in additional tax refunds in fiscal year 2026.

3. Recent Negotiations: Recent reports indicated Apollo Global Management had engaged investment bank Moelis to negotiate a possible debt restructuring with Wolfspeed, but these efforts appear to have been unsuccessful.

Implications of Chapter 11 Filing

If Wolfspeed proceeds with Chapter 11 bankruptcy, several key implications emerge:

1. Creditor Support: The WSJ report indicates Wolfspeed is looking to file for bankruptcy with the support of a majority of its creditors, suggesting a pre-packaged or pre-arranged bankruptcy plan may be in the works.

2. Operational Continuity: Chapter 11 bankruptcy would allow Wolfspeed to continue operations while restructuring its debt obligations. This is consistent with statements from departing CFO Neill Reynolds on the May 9 conference call, who mentioned pursuing in-court options to renegotiate debt.

3. Shareholder Impact: The market reaction has been severe, with shares cratering 40% in post-market trading on Tuesday after already dropping 10% by the closing bell. The stock, which hit a peak of $142.53 in January 2021, has fallen dramatically, with shares down 53% year-to-date even before this news.

4. Analyst Responses: Prior to this bankruptcy news, several analysts had already downgraded Wolfspeed following its Q3 earnings report, including Citi downgrading to 'Sell' from 'Neutral' and JP Morgan downgrading to 'Underweight' from 'Neutral'.

Strategic and Industry Implications

The potential bankruptcy has broader implications:

1. Silicon Carbide Market: Wolfspeed's struggles could reshape the competitive landscape in the silicon carbide semiconductor space, potentially creating opportunities for competitors like Infineon and ON Semiconductor.

2. U.S. Manufacturing Policy: Wolfspeed was positioned as a key player in advancing U.S. semiconductor manufacturing capacity, with Apollo Partner Joseph Jackson previously stating that their investment would help "solidify [Wolfspeed's] leadership" and advance "key tenets of the CHIPS and Science Act." The bankruptcy could complicate these policy objectives.

3. Electric Vehicle Supply Chain: As a major supplier of silicon carbide components essential for electric vehicle power systems, Wolfspeed's restructuring could impact the EV supply chain, particularly as the industry faces broader challenges with adoption rates and profitability.

Conclusion

Wolfspeed's likely bankruptcy filing represents the culmination of multiple challenges, including excessive debt, operational difficulties with manufacturing expansion, and market headwinds in its key end markets. The filing appears to be an acknowledgment that despite significant government support and earlier financing arrangements, the company's current capital structure is unsustainable.

For investors, this development underscores the risks associated with capital-intensive technology manufacturing, particularly in emerging segments like silicon carbide semiconductors. While Chapter 11 offers Wolfspeed a path to potentially emerge as a more financially stable company, existing shareholders face significant uncertainty and likely substantial losses.

The speed and severity of Wolfspeed's decline—from a company valued at over $15 billion in 2021 to one facing bankruptcy in 2025—highlights how quickly fortunes can change even in industries with promising growth trajectories. The outcome of this restructuring will be closely watched by competitors, customers, and policymakers alike, given Wolfspeed's significant position in the semiconductor supply chain and U.S. manufacturing strategy.

Space Sector Analysis: Navigating the Final Financial Frontier

The space sector continues to capture the imagination of both retail and institutional investors. With recent earnings reports across the industry, now is an ideal time to assess the current landscape and identify potential trading opportunities. Today, we'll dive into key players including LUNR, RKLB, SPCE, ASTS, and PL, exploring both bull and bear scenarios for each.

Industry Overview: Mixed Signals Amid Long-Term Promise

Space stocks have exhibited significant volatility in 2025, with capital-intensive business models facing scrutiny in the current interest rate environment. While long-term potential remains massive, near-term financial sustainability continues to separate winners from laggards. Let's examine the current state of play across several key names.

Terran Orbital (LUNR): Satellite Specialist at a Crossroads

Recent Performance: Terran Orbital's latest earnings revealed a revenue increase of 18% year-over-year, yet cash burn remains elevated as the company scales its satellite manufacturing capabilities. The backlog has grown to approximately $220 million, showing sustained demand for its services.

Bull Case:

• Growing defense contracts providing revenue stability
• Expanding production capacity with potential for economies of scale
• Strategic partnership with Lockheed Martin offers credibility and funding channels
• Satellite-as-a-service model could drive recurring revenue streams

Bear Case:

• Ongoing dilution concerns with frequent capital raises
• Competition intensifying from both startups and established aerospace players
• Extended timeline to profitability straining investor patience
• Heavy dependence on government contracts creates concentration risk

Trading Strategy: For bulls, selling cash-secured puts at the $1.50 strike provides attractive premium while establishing a potential entry point below current market value. Bears might consider buying $2.50 puts with 3-6 month expiration, giving time for financial realities to impact valuation.

Rocket Lab (RKLB): The Small Launch Leader

Recent Performance: Rocket Lab's Q1 earnings exceeded expectations with a 40% revenue increase, driven by both launch services and space systems. Launch cadence has improved to approximately one mission per month, with the Neutron rocket development progressing toward its initial test flight.

Bull Case:

• Established track record with consistent launch success
• Vertical integration strategy creating multiple revenue streams
• Neutron rocket development expanding addressable market
• Space systems division showing impressive margins

Bear Case:

• Neutron development costs creating significant cash drain
• Increasing competition from emerging small launch providers
• Valuation still assumes perfect execution of future growth plans
• Muted reaction to positive earnings suggests sentiment challenges

Trading Strategy: A bullish vertical call spread (buying the $7 calls and selling the $9 calls with 3-month expiration) limits capital at risk while providing leveraged upside if RKLB breaks resistance. Bears might consider shorting shares with tight stop losses, as high short interest creates squeeze potential on positive news.

Virgin Galactic (SPCE): Turbulent Trajectory

Recent Performance: Virgin Galactic's recent earnings were disappointing, with minimal revenue and continued cash burn. Flight schedules remain inconsistent, and the company announced another capital raise to fund operations through 2026.

Bull Case:

• Unique experience with no direct competitors currently operational
• High-net-worth customer waitlist providing potential future revenue
• Brand recognition that could facilitate expansion into adjacent markets
• Significantly reduced valuation from previous highs

Bear Case:

• Uncertain timeline to meaningful revenue generation
• Regular dilution of shareholders through capital raises
• Limited scalability of current business model
• Possible technological obsolescence as competitors advance

Trading Strategy: For those with a contrarian bullish outlook, selling deep out-of-the-money covered calls against long stock positions can reduce cost basis while maintaining upside exposure. Bears might consider buying put spreads to capitalize on potential further decline while limiting premium outlay in this high-volatility name.

AST SpaceMobile (ASTS): Direct-to-Smartphone Promise

Recent Performance: AST SpaceMobile recently demonstrated successful direct satellite-to-smartphone connectivity, a significant technical milestone. However, earnings showed minimal revenue with accelerating cash burn as the company works toward its commercial constellation deployment.

Bull Case:

• Revolutionary technology with massive addressable market
• Strategic partnerships with major global telecom providers
• Successful technology demonstrations validating the concept
• First-mover advantage in direct satellite-to-smartphone connectivity

Bear Case:

• Extremely capital-intensive deployment schedule ahead
• Regulatory hurdles in multiple jurisdictions
• Execution risk in scaling from demonstration to commercial service
• Competition from established players entering the space

Trading Strategy: This remains a binary outcome stock where options straddles (buying both puts and calls at the same strike) could capitalize on major price movements regardless of direction. Conservative investors might consider waiting for constellation deployment milestones before establishing positions.

Planet Labs (PL): Earth Observation Economics

Recent Performance: Planet Labs reported steady growth in its subscription revenue model during its latest earnings call, with a 22% increase in Annual Contract Value. Customer retention rates remain strong at 95%+, though the path to GAAP profitability remains extended.

Bull Case:

• Recurring subscription revenue providing business stability
• Growing applications across industries for earth observation data
• Established satellite constellation already in operation
• Strategic partnerships with government agencies and enterprise clients

Bear Case:

• Slower growth than initially projected post-SPAC
• Increasing competition from both startups and traditional aerospace
• Commoditization risk for certain types of earth imagery
• Stretched timeline to profitability

Trading Strategy: Selling cash-secured puts at the $2.00 strike offers an attractive entry point if assigned, with premiums enhancing returns. For those already holding shares, covered calls can generate income while waiting for business fundamentals to improve.

Sector-Wide Trading Considerations

Several patterns emerge across the space sector that inform our trading approach:

1. Liquidity Management: Companies with stronger cash positions and lower burn rates deserve valuation premiums in the current environment.
2. Revenue Visibility: Firms with government contracts or subscription models offer more predictable financial trajectories.
3. Milestone Catalysts: Major technical achievements drive significant short-term price movements across the sector.
4. Options Premiums: Elevated implied volatility creates opportunities for premium collection strategies.
5. Portfolio Allocation: Given binary outcomes for many companies, position sizing is critical within this high-risk sector.

Putting It All Together: Our Current Approach

We're maintaining a selective exposure to the space sector with the following strategic positioning:

• Core Holdings: Establishing small positions in leaders with proven technology and clear paths to profitability (RKLB, PL)
• Premium Collection: Selling puts on beaten-down names near support levels (LUNR, SPCE)
• Catalyst Plays: Using limited-risk options strategies around major announcements and milestones
• Hedge Positions: Maintaining small put positions as portfolio insurance against sector-wide drawdowns

The space economy represents one of the most significant long-term growth opportunities of our generation. However, the path to profitability will be neither straight nor guaranteed for all participants. By calibrating both exposure and expectations, we can navigate this sector's extreme volatility while positioning for potential outsized returns.

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Disclaimer: This blog post is for educational purposes only and should not be considered investment advice. SharkWater Trading may hold positions in the securities mentioned. Past performance does not guarantee future results. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.

Trading Update: WOLF Premium Collection Strategy Delivers While OKLO Soars

At SharkWater Trading, we pride ourselves on identifying high-probability trading opportunities through careful analysis and strategic positioning. Today, we're excited to share updates on three key positions that exemplify our approach to the markets.

WOLF: Capitalizing on Premium Collection with Weekly Puts

Our contrarian bullish thesis on WOLF has been paying dividends through our strategic approach of selling the $2.50 weekly puts. While many traders have been bearish on the stock, we've identified a strong support level that has made this premium collection strategy particularly lucrative.

Key factors supporting our bullish stance on WOLF:

• Solid floor established at the $2.50 level with multiple successful tests
• High implied volatility creating attractive premiums for put sellers
• Fundamental value emerging as the stock stabilizes
• Consistent weekly income generation from our put selling strategy

By selling the $2.50 weekly puts, we've been able to:

• Collect substantial premiums week after week
• Benefit from time decay (theta) working in our favor
• Maintain a bullish bias while generating income
• Position ourselves to potentially own WOLF at an attractive price point

This strategy demonstrates how identifying key support levels and understanding options dynamics can create consistent income streams even in volatile markets.

OKLO: Riding the Nuclear Renaissance Wave

Our bullish conviction on OKLO continues to exceed expectations. The advanced nuclear reactor company has been a standout performer in our portfolio, capitalizing on the growing demand for clean energy solutions.

OKLO's success can be attributed to:

• Strong regulatory progress with the NRC
• Strategic partnerships with major utilities
• Growing investor interest in next-generation nuclear technology
• Positive sentiment around small modular reactors (SMRs)

Our early entry into OKLO positions has resulted in substantial gains, reinforcing our thesis that the nuclear renaissance presents significant opportunities for forward-thinking investors.

ELF Put Strategies: Timing the Overvaluation

While we've been collecting premiums on WOLF, our bearish positioning on ELF through outright put purchases has also proven successful. We identified specific vulnerabilities in ELF's valuation and market positioning that suggested downside potential.

Our analysis highlighted:

• Stretched valuations relative to growth projections
• Increasing promotional activity suggesting margin pressure
• Rising competition from both established players and new entrants
• Technical indicators signaling overbought conditions

The combination of fundamental and technical analysis allowed us to time our entry effectively, with our ELF put positions now showing healthy profits.

Looking Ahead: Multiple Strategies for Dynamic Markets

These successful trades underscore the power of:

1. Diverse Strategies: Using different approaches (premium collection vs. directional bets) based on market conditions
2. Support/Resistance Analysis: Identifying key levels like WOLF's $2.50 support for strategic positioning
3. Income Generation: Utilizing options strategies to create consistent cash flow
4. Risk Management: Balancing directional trades with income-generating positions

As we move forward, we continue to look for opportunities to deploy both directional and income-generating strategies based on market conditions.

Key Takeaways

• WOLF's $2.50 weekly put selling strategy continues to generate consistent income
• OKLO remains a portfolio highlight, validating our early bullish thesis
• ELF puts demonstrate the value of identifying overvalued securities
• Different market conditions call for different strategies - from premium collection to directional trades

Stay tuned for more updates as we navigate these dynamic markets. Remember, successful trading isn't just about directional calls—it's about finding the right strategy for each opportunity.

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Disclaimer: This blog post is for educational purposes only and should not be considered investment advice. Past performance does not guarantee future results. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.

Follow SharkWater Trading for more market insights and trading strategies.

Selling Puts on WOLF: Capitalizing on High Volatility in the Weekly Options Market

Posted on SharkWaterTrading.com

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📊 Trade Alert: WOLF Weekly Puts Showing Exceptional Premiums

The volatility in Wolfspeed Inc. (WOLF) has been a goldmine for put sellers, and it's time to put this opportunity on your radar. Recent market conditions have created an ideal setup for collecting premium through weekly put sales.

The Opportunity at a Glance

• Stock: WOLF (Wolfspeed Inc.)
• Strategy: Selling weekly out-of-the-money puts
• Key Benefit: Elevated implied volatility = Higher premiums

Why WOLF Right Now?

The semiconductor sector has been experiencing significant volatility, and WOLF has been at the center of it. As a leader in silicon carbide technology, the company's stock has seen dramatic price swings that translate directly into inflated option premiums.

What makes this attractive:

• High implied volatility across all strikes
• Strong technical support levels for strike selection
• Weekly options offering rapid theta decay
• Fundamental growth story intact (EV/renewable energy demand)

The Strategy Breakdown

When you sell puts on WOLF, you're essentially getting paid to wait for a pullback. Here's how it works:

1. Select Strike Price: Choose a strike below current market price (typically at key support levels) Looking at the 3 and 2.50s
2. Collect Premium: Receive immediate income from the option sale
3. Manage Position:
   • If WOLF stays above strike: Keep full premium
   • If assigned: Own shares at effective cost basis (strike - premium)

Recent Performance Examples

Without getting into specific numbers, weekly put sellers have been seeing:

• Consistent premium collection opportunities
• Multiple chances to roll positions for additional credit
• Attractive risk/reward ratios on out-of-the-money strikes

Risk Management Essentials

⚠️ Important Considerations:

• Size positions appropriately (never risk more than you can afford to lose)
• Have cash/margin available for potential assignments
• Monitor semiconductor sector trends closely
• Set clear profit targets and exit strategies

Technical Levels to Watch

Key support zones for strike selection:

• Major moving averages
• Previous swing lows
• Volume-based support levels
• Fibonacci retracement zones

The Bottom Line

WOLF's current volatility profile presents an excellent opportunity for experienced options traders comfortable with put-selling strategies. The combination of high premiums and identifiable support levels creates a favorable risk/reward scenario for those who manage their positions properly.

Action Items: ✅ Add WOLF to your options watchlist ✅ Monitor weekly put premiums at key support levels ✅ Consider starting with smaller positions to test the strategy ✅ Always maintain proper risk management

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Disclaimer: Options trading involves substantial risk and is not suitable for all investors. Past performance does not guarantee future results. This is not a recommendation to buy or sell any security. Always do your own research and consider your risk tolerance before trading.

Tags: #OptionsTading #PutSelling #WOLF #WeeklyOptions #VolatilityTrading #IncomeStrategies

YMAX: Why This High-Yield ETF May Have Found Its Bottom

The YieldMax Universe Fund of Option Income ETFs (YMAX) has captured the attention of income-seeking investors with its eye-popping distribution yields, but its price decline has raised concerns. After analyzing the recent performance and technical indicators, there's compelling evidence that YMAX may have found a bottom and now presents an attractive value opportunity.

A Fund of Funds with Significant AUM

YMAX operates as a "fund of funds," primarily investing in other YieldMax ETFs rather than directly in securities of individual companies. With assets under management (AUM) now exceeding $700 million, it has established itself as a significant player in the income ETF space since its launch in January 2024.

This substantial AUM indicates strong investor interest and provides the fund with stability and liquidity. The fund's growing asset base validates its approach and suggests institutional confidence in its strategy.

Technical Analysis Points to a Bottom

Recent price action shows YMAX forming a solid base around current levels. Technical indicators suggest the fund may have found support:

• The relative strength momentum indicator (RSI) is approaching 32, placing it in a neutral position and likely near a support level
• Price consolidation pattern forming after previous declines
• Trading volume patterns showing potential accumulation
• Current price action indicating a potential reversal of the downtrend

This technical setup is often seen at market bottoms before a recovery phase begins.

Impressive Yield Makes It a Compelling Value Play

YMAX offers an exceptional distribution yield, with recent distribution rates ranging from 57% to 68% according to various sources. The most recent distribution on May 2, 2025, contained 73.04% return of capital and 26.96% income.

While the high yield is eye-catching, it's important to understand that:

1. Distributions include a combination of dividends, capital gains, and return of capital
2. The fund switched to weekly distributions in September 2024
3. The yield strategy involves options income from underlying YieldMax ETFs

This distribution profile makes YMAX particularly suitable for income-focused portfolios in the current market environment.

Risk Management Through Diversification

Unlike single-stock option income ETFs, YMAX provides diversification across multiple YieldMax ETFs, each implementing options strategies on different underlying securities. This approach helps mitigate idiosyncratic risks associated with any single stock or sector.

The fund's equal-weighted strategy across various option income ETFs offers balanced exposure, reducing concentration risk while maintaining an aggressive income approach.

Current Price Presents Value Opportunity

At current price levels, YMAX represents a compelling value proposition for several reasons:

1. The price has stabilized after previous declines, potentially indicating a bottom
2. The extreme yield compensates investors while waiting for potential price appreciation
3. The fund's NAV erosion rate appears to be moderating
4. Market conditions for options strategies have been improving

Important Considerations

Investors should be aware that YMAX employs aggressive options strategies through its underlying ETFs. This approach caps potential upside in exchange for high current income and exposes the fund to potential NAV erosion during market downturns.

The fund carries a management fee of 0.29% plus acquired fund fees and expenses of 0.99%, for a total expense ratio of 1.28%. This fee structure should be considered when evaluating the total return potential.

Conclusion

YMAX appears to have found a bottom after its price decline and now presents an attractive value opportunity for income-focused investors. With over $700 million in AUM, a stabilizing price, and exceptional yield, it deserves consideration for income portfolios.

The technical formation of a solid base, combined with the fund's diversified approach to options income, positions YMAX well for potential recovery. For investors seeking high current income with some possibility of price stabilization or appreciation, YMAX offers a compelling risk-reward profile at current levels.

This analysis is based on current market data and technical indicators. All investments carry risk, and past performance is not indicative of future results.