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Option Bears Predict Lower Lows for FireEye Inc (FEYE)

Short-term contracts are in demand in FireEye Inc's options pits

by 5/7/2014 2:44 PM
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Option Brief: Put traders are pouring into FireEye Inc's (NASDAQ:FEYE) options pits this afternoon, as 32,000 contracts are on the tape -- nine times the intraday norm. Of course, this is occurring amid the tech stock's 26.3% dive, following last night's mixed first-quarter earnings report, which included a lowered current-quarter and full-year outlook, and which prompted a number of price-target cuts this morning. At last check, FEYE was hovering at $27.35.

In the options pits, traders are favoring short-term options, with each of the three most active strikes expiring at this Friday's close. At the top of the heap is FEYE's weekly 5/9 27-strike put, where 4,627 contracts have changed hands -- the majority at the ask, suggesting they were bought. In addition, volume outstrips open interest at the newly near-the-money strike, indicating fresh bearish bets are being initiated. Some of this increased negative attention is likely due to the stock's short-sale restricted designation, as would-be short sellers look for alternative ways to bet against FEYE. Against this backdrop, the security's 30-day at-the-money implied volatility hit a 12-month high earlier today.

In a nutshell, the put buyers are looking for FEYE shares to dive even further by weekly options expiration, two-plus sessions from now. Specifically, they're hoping the stock breaches the 27 strike by Friday's closing bell, which would represent record-low territory. In fact, the current all-time low of $27.05 was touched earlier today. On the other hand, if FireEye Inc (NASDAQ:FEYE) remains above the strike through the option's lifetime, the most the speculators will part with is the initial cash outlay.


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