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Juniper Networks, Inc. (JNPR) Traders Do an About Face

Bearish near-term speculators flock toward JNPR

by 3/14/2013 2:03 PM
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Juniper Networks, Inc. (NYSE:JNPR - 20.50) has been a favorite among bullish bettors lately, according to data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the equity's 10-day call/put volume ratio sits at 20.22, indicating traders have bought to open more than 20 calls for every put during the last two weeks. This ratio is just 1 percentage point shy of a yearly peak, meaning speculators have been snapping up calls over puts at a near annual-high clip.

However, today's options activity is a stark contrast to JNPR's recent trend, as approximately 13,000 puts have been exchanged so far today. This is more than 10 times the usual intraday pace, and about 16 times the number of calls traded. The bulk of the action has centered around the April 20 put, where nearly 8,200 contracts have crossed the tape -- 99% of them at the ask price, suggesting they were bought.

Looking more closely at the data, it appears these near-the-money contracts changed hands at a volume-weighted average price (VWAP) of $0.46. Since today's volume outstrips current open interest levels -- along with the fact that implied volatility was last seen 2.2 percentage points higher -- it's likely that new positions are being initiated here. In other words, these put buyers are counting on JNPR to retreat below $19.54 (strike price less the VWAP) by April expiration. This would entail a 4.7% drop from the stock's present perch.

Technically speaking, the network infrastructure provider has tacked on just over 4% year-to-date, and has trailed the broader S&P 500 Index (SPX) by more than 7 percentage points during the past two months. What's more, the stock is poised to finish a third consecutive week below its 10-week moving average, which had previously acted as support. Time will tell if JNPR will sink low enough to reward today's bearish speculators.


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