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F5 Networks Bears Expect More Downside in 2013

FFIV puts were a popular choice on Thursday

by 12/7/2012 9:59 AM
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Put volume picked up on F5 Networks, Inc. (NASDAQ:FFIV - 92.37) on Thursday, with 6,635 contracts crossing the tape -- more than double the tech stock's average daily put activity. The center of attention was FFIV's January 2013 90-strike put, where 2,948 contracts were exchanged. About 84% of these put options traded closer to the ask price, suggesting they were purchased, and open interest at this strike jumped overnight by 2,322 contracts.

In other words, it looks like speculative players bought to open a new batch of bearish bets on FFIV yesterday. Meanwhile, the volume-weighted average price (VWAP) on the January 90 put arrived at $3.97. Based on this cost of entry, a 90-strike put buyer would need FFIV to drop below breakeven at $86.03 by the time expiration rolls around. The shares finished Thursday at $92.52, so FFIV would need to drop just over 7% by the close on Jan. 18 for the average put buyer to break even.

Thursday's interest in FFIV put options continued a recent trend for the stock. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.18 puts for every call on the equity. This ratio ranks above 80% of other such readings taken over the past year, pointing to a healthier-than-usual appetite for puts over calls.

FFIV is sitting on a year-to-date drop of roughly 13%, significantly lagging the broader equities market. The stock's recent rebound attempt appears to have been thwarted by former support at the $95 level, and Thursday's put buyers may now be expecting FFIV's longer-term slump to continue.

 Daily Chart of FFIV since September 2012


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