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While F5 Networks, Inc. (NASDAQ:FFIV) sports a six-month loss of 15.3%, the stock has stepped up its game in the past month, tacking on a whopping 30.1% to its current trading level at $89.19. With that being said, calls have been the options of choice among FFIV traders of late. Specifically, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than three calls for every put within the last two weeks. The resulting 10-day call/put volume ratio of 3.23 ranks higher than all other such readings taken over the year, indicating FFIV calls are being picked up over puts at an annual-high rate.
Following this trend, FFIV saw roughly 18,000 calls -- more than two times the daily norm -- change hands in its options pits yesterday. By comparison, only 1,252 puts were exchanged. Seeing the most activity was the October 92.50 call, where 8,380 contracts crossed. Digging deeper, a block of 4,260 calls was bought to open at the ask price of $3.55, and open interest soared overnight, collectively inferring the initiation of long call positions. At the same time, a block of 2,630 September 87.50 calls was apparently sold to close for the bid price of $4.10. Considering open interest depleted at the strike overnight, it seems one speculator liquidated the back-month calls to buy more October-dated calls.
By purchasing these out-of-the-money options, yesterday's call buyers anticipate FFIV will climb to heights unreached since late February. Specifically, they expect FFIV to finish north of the breakeven price of $96.05 (strike price plus the VWAP) by October options expiration. With that being said, the most the call buyers stand to lose is the initial premium paid, should FFIV remain below the 92.50 strike.
The calls buyer can rest easy knowing the initial premium paid is relatively low. F5 Networks, Inc.'s Schaeffer's Volatility Index (SVI) of 30% ranks higher than just 7% of all other readings taken throughout the year, indicating the stock's short-term option prices have rarely been less inexpensive during the last year as they are currently.