Wolfspeed, Inc. (NYSE:WOLF) shares plunged on Wednesday following a report that the company is preparing to file for Chapter 11 bankruptcy protection as it struggles with a mountain of debt. 

Unusual options activity was spotted Tuesday afternoon before the report was released. 

What To Know: A Wall Street Journal report released after the closing bell on Tuesday triggered a massive sell-off that continued throughout Wednesday's session. Notably, options traders bought a large volume of put options on Wolfspeed ahead of the reports of a bankruptcy. 

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In fact, Tuesday's net premium was negative $3.7 million. Traders spent $3.7 million more buying options than they received selling them, indicating a strong belief the stock would fall sharply -- before the report of a possible bankruptcy was made public. 

Unusual Whales, an anonymous social media account, pointed out in a post on X that traders were betting heavily that Wolfspeed stock would crash. And they did so in unusually large amounts just before the bankruptcy news became public.

"To say options sentiment was bearish on this is an understatement. Today’s net premium, NEGATIVE $3.7 MILLION! Most active chains $WOLF $3 puts expiring 07/18/2025. People have been trading the companies downfall for a while, but WENT INCREDIBLY HEAVY today, before the news. People knew, and kept trading it," Unusual Whales wrote. 

The post suggests that some traders may have had advance knowledge of the bankruptcy plans, a situation that often attracts regulatory scrutiny. 

Those who bought puts before the news stood to make substantial profits from the stock's collapse.

Wolfspeed stock closed Wednesday down 59.11% at $1.28 per share, according to data from Benzinga Pro.

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