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Juniper Networks Traders Display a Rare Appetite for Puts

JNPR traders are targeting April-dated put options

by 1/8/2013 12:34 PM
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The shares of Juniper Networks, Inc. (NYSE:JNPR - 19.71) have succumbed to broad-market headwinds this afternoon, and are in danger of ending beneath their 10- and 20-day moving averages for the first time since Nov. 23. Against this backdrop, it looks like options traders are picking up long-term puts on the equity, either to gamble on a significant pullback or to insure a long stock position.

Around midday, JNPR has already seen about 11,000 puts change hands -- roughly nine times its average intraday volume, and more than twice the number of calls exchanged. Most popular has been the April 16 put, which has seen more than 8,000 contracts cross the tape. Ninety-nine percent of the puts traded at the ask price, and implied volatility was last seen higher, hinting at potential buy-to-open action.

By purchasing the puts to open, the buyers have one of two motives: to profit from a breach of the $16 level, or to protect shares of JNPR. In the case of the former, the buyers will make money if JNPR retreats beneath the $15.57 level (strike price minus volume-weighted average price of $0.43) by April options expiration, which encompasses the firm's turn in the earnings spotlight on Jan. 24. In the case of the latter, the speculators have locked in an acceptable sale price ($16) for their JNPR shares, should the stock plummet within the next few months, but their primary goal is for JNPR to extend its upward momentum.

Whatever the motive, today's appetite for puts marks a shift in sentiment among JNPR's options crowd. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.48 indicates that calls more than double puts among options slated to expire within three months. Furthermore, this ratio registers in the 12th percentile of its annual range, implying that near-term options traders are much more call-skewed than usual right now.


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