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Calls were in heavy rotation on Akamai Technologies, Inc. (NASDAQ:AKAM) on Tuesday, with roughly 15,000 of these bullishly oriented options changing hands -- nearly tripling AKAM's average daily volume of 5,549 calls. By contrast, only 2,507 puts traded on the tech stock yesterday.
The center of attention was the May 42 call, which traded volume of 6,666 contracts. More than two-thirds of these contracts traded at the ask price, and implied volatility surged 5.2 percentage points by the close -- suggesting most of these options were bought. Meanwhile, open interest rose by 5,814 contracts overnight, confirming the addition of new bullish bets on Akamai Technologies.
Based on the option's volume-weighted average price (VWAP) of $0.56, Tuesday's call buyers need AKAM to rise above breakeven at $42.56 per share (strike price plus net debit) before the closing bell sounds on Friday, May 17 -- when these contracts are due to expire. Based on the stock's close at $34.79 yesterday, AKAM would have to rally more than 22.3% over the next month for these bulls to turn a profit.
From a broader view, speculative players have rarely been more call-focused on AKAM. During the past 10 sessions, options traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 7.89 calls for every put on Akamai Technologies. This ratio arrives in the 100th percentile of its annual range, representing a 52-week peak in call buying relative to puts.
Looking ahead, traders could be scooping up May-dated calls in anticipation of AKAM's upcoming earnings report. The company is expected to announce its first-quarter results after the market closes next Wednesday, April 24, with analysts looking for a profit of 47 cents per share. In each of the past four quarters, Akamai has consistently surpassed Wall Street's bottom-line estimates.
In fact, some of those call buyers could actually be short sellers looking to hedge their bets ahead of earnings. Short interest on AKAM spiked by more than 86% during the past two reporting periods, and now accounts for a robust 10.4% of the stock's float.
On the charts, AKAM is fractionally lower at $34.09 this morning. The shares are hovering between resistance at their 10-week moving average and support in the $34 neighborhood.