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Juniper Networks Wins Over Option Bulls; Is Wall Street Next?

JNPR calls have become a popular choice among speculative traders

by 12/19/2012 11:01 AM
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Call volume ramped up on Juniper Networks, Inc. (NYSE:JNPR - 20.41) during the course of Tuesday's session, with more than 9,400 contracts crossing the tape -- easily outpacing the stock's average daily call activity of about 4,440 contracts. Most of the action was centered around JNPR's January 2013 22-strike call, where 5,115 contracts were exchanged. Nearly all of these calls crossed at the ask price, suggesting they were purchased, and open interest at this strike rose overnight by 4,500 contracts. In other words, it looks as though new bullish bets were added here on Tuesday.

Those JNPR January 22 calls traded at a volume-weighted average price (VWAP) of $0.29, which means option buyers need the stock to rise above breakeven at $22.29 before they'll begin to see any profits. January-dated options expire in just over four weeks, and JNPR is currently trading at $20.41 -- so the stock has roughly a month to gain more than 9.2%.

The day's skew toward calls continued a growing trend for JNPR. During the past 10 days, speculators have bought to open 8.79 calls for every put on the stock, according to cumulative data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks higher than 86% of other such readings taken during the last year, suggesting traders have shown a greater preference for calls over puts just 14% of the time.

Technically speaking, JNPR has beaten a steady path higher since late November, and the shares are now looking to establish a foothold above former resistance in the round-number $20 level.

If the stock's breakout continues, a few bullish brokerage notes could aid JNPR in its uptrend. Currently, 20 analysts out of 28 maintain a tepid "hold" rating on the shares, and the average 12-month price target is a lowball $18.82 -- leaving plenty of room for upgrades and price-target hikes going forward.


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