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Calls are flying off the shelves in Juniper Networks, Inc.'s (NYSE:JNPR) options pits today, with the contracts trading at nearly eight times the average intraday call volume. By the numbers, 8,133 calls have changed hands, compared to fewer than 250 puts. The November 20 call is the most active strike, where 6,911 contracts -- including one large block of 4,443 calls -- have been exchanged, mostly at the ask price. Implied volatility is up 1.6 percentage points, and only 615 calls make up open interest here, pointing to the initiation of a fresh batch of bullish bets.
With JNPR perched at $20.39, the calls are currently in the money. However, in order for the options to be profitable at expiration, the stock must rise above breakeven at $21.27, which is the strike plus the volume-weighted average price of $1.27, ahead of the close on Nov. 15. Delta for the call is sitting at 0.58, indicating a 58% chance the option will remain in the money over the next six weeks.
The lifetime of this call encompasses a time frame which tentatively includes JNPR's third-quarter earnings release. Against this backdrop, implied volatility at the November 20 call is inflated relative to the stock's 40-day historical (realized) volatility (42.4% vs. 31.0%). In other words, premium is rather expensive at the moment, relatively speaking.
Technically, JNPR doesn't have much to brag about, with the shares up a slight 3.7% year-to-date. However, Juniper Networks, Inc. (NYSE:JNPR) has matched or exceeded analysts' bottom-line earnings expectations in each of the past eight quarters, which has translated into an average gain of 2.7% in the week following the report. It could be that today's batch of option bulls may simply be betting on a repeat of history.
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