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The shares of Akamai Technologies, Inc. (NASDAQ:AKAM - 35.19) are trading modestly higher today, though upward momentum is stalling in the face of the stock's descending 10-day moving average. Nevertheless, short-term calls are flying off the shelves in the options pits, with speculators either initiating bullish bets or insuring their bearish ones.
At last check, the tech concern has seen 16,000 calls change hands -- nearly seven times the norm, and close to eight times the number of Akamai puts traded. Most of the volume has transpired at the April 42 call, where 5,600 contracts have traded at a volume-weighted average price (VWAP) of $0.18. The bulk of the calls have crossed on the ask side, and implied volatility is trending higher, hinting at buy-to-open activity.
As alluded to earlier, the out-of-the-money call buyers have one of two motives: to profit from significant short-term upside, or to protect a short stock position. In the case of the former, the bulls will begin to make money if AKAM muscles atop the $42.18 level (strike price plus VWAP) -- in territory not charted since the start of the year -- within the next month or so. Risk, meanwhile, is limited to the initial premium paid for the call, should Akamai Technologies remain south of the strike.
In the case of the latter, the calls lock in an acceptable price ($42) for the shorts to repurchase their shares, should the security skyrocket in the near term. Making this theory even more plausible is that short interest skyrocketed by 72.3% during the past two reporting periods, and now accounts for 5.6% of AKAM's total available float. Still, at the stock's average daily trading volume, it would take fewer than three sessions to repurchase these pessimistic positions, pointing to little fuel for any short-covering rally.
Whatever the motive, today's appetite for calls is just more of the same for AKAM. Despite underperforming the broader S&P 500 Index (SPX) by 23 percentage points during the past three months, AKAM's short-term options traders are more call-heavy than usual. In fact, the equity's Schaeffer's put/call open interest ratio (SOIR) sits at a 52-week nadir of 0.46, indicating that near-term calls haven't outnumbered puts by a wider margin in the past year.
At last look, AKAM is up 1.5% to wink at the $35.19 level, thanks to a new "outperform" initiation at FBN Securities. However, the stock is struggling to surmount its aforementioned 10-day moving average, which -- along with its 80-day cohort -- has served as resistance since early February. Should the equity cower in the face of trendline resistance, an unwinding of optimism in the options arena could translate into a contrarian headwind for the shares.