Stocks quoted in this article:
Akamai Technologies, Inc. (NASDAQ:AKAM - 37.96) is trading in the red today, and one group of bearish speculators is expecting this downside to continue over the next few weeks. More than half of the 5,483 puts that have crossed the tape so far have changed hands at AKAM's March 40 strike. A healthy portion of these have gone off at the ask price, implied volatility was last seen 2.4 percentage points higher, and volume is outstripping open interest, hinting at the initiation of new positions.
By buying these in-the-money puts to open for a volume-weighted average price (VWAP) of $2.36, traders will begin to profit with each step below $37.64 (strike price less the VWAP) AKAM takes through the close on Friday, March 15 -- when front-month options expire. Should the equity fail to breach this breakeven mark by expiration, the most today's put buyers have risked is the initial premium paid. With implied volatility at this strike currently deflated relative to AKAM's 20-day historical (realized) volatility (29% vs. 62.8%), the investors can rest easy knowing the premium they paid was relatively cheap.
From a wider sentiment perspective, AKAM's near-term puts have been popular among option players. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.71 ranks in the 70th percentile of its annual range, implying traders have been more put-heavy than usual toward options expiring in three months or less.
On the charts, AKAM has been a technical underperformer of late, which may explain this bearishly skewed bias among option players. On a relative-strength basis, the equity has lagged the broader S&P 500 Index (SPX) by roughly 13 percentage points throughout the past 40 sessions. Meanwhile, the security has chalked up a modest 7.8% year-to-date deficit.
In today's session, AKAM was down 1.6% heading into the final hours of trading, and was last seen lingering near $37.96.