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Juniper Networks Option Players Bet On a Near-Term Pullback

JNPR's December 19-strike put is getting some looks from bears today

by 12/17/2012 2:38 PM
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Despite the stock's positive price action during the month of December, a put has emerged as the most active strike on Juniper Networks, Inc. (NYSE:JNPR - 19.65) today. Around 1,000 contracts have traded at JNPR's December 19-strike put. All of these have gone off at the ask price, and implied volatility was last seen 6.1 percentage points higher, pointing to buy-to-open activity.

By purchasing these puts for a volume-weighted average price (VWAP) of $0.12, traders will profit with each step south of $18.88 (the strike price minus the average premium paid) JNPR takes through Friday's close -- when front-month options expire. This breakeven level is a 3.9% discount to the stock's current price.

Expanding the scope, calls have been the options of choice on JNPR in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open almost nine calls for every put during the past 10 sessions. This call/put volume ratio of 8.84 ranks in the 86th percentile of its annual range, suggesting bullish bets have been picked up over bearish at a near annual-high clip.

Considering the stock has rallied more than 40% since hitting a year-to-date low of $14.01 on July 17, today's penchant for near-the-money puts could merely be shareholders picking up portfolio protection against a potential pullback. Additionally, the equity's Relative Strength Index (RSI) of 71 implies JNPR is currently overbought. In other words, a near-term decline may be on the horizon -- particularly with the shares closing in on the $20 level, which has capped the stock's rally attempts since September.

At last check, JNPR is up 0.3% to trade at $19.65.


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