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Option Clips: Kratos Defense, Akamai Technologies, Inc., and Zynga Inc

Reviewing notable options activity on Kratos Defense & Security Solutions, Inc, Akamai Technologies, Inc., and Zynga Inc

by 2/3/2014 2:18 PM
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Two equities generating buzz on StockTwits today are military solutions provider Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) and cloud infrastructure issue Akamai Technologies, Inc. (NASDAQ:AKAM). Social game guru Zynga Inc (NASDAQ:ZNGA), meanwhile, is also garnering unusual attention in the options pits. Here's a look at how traders have been aligning their speculative bets today.

  • Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is bucking the broad-market trend lower today, up 7.2% at $7.75. The stock earlier touched a new two-year high of $9.18, after the company said it won a five-year, $7.92 billion contract with the U.S. Navy. Intraday option volume is running at more than 25 times the norm, with roughly 83% of the action on the call side. As such, the stock's 30-day at-the-money implied volatility has shot 17.9% higher to 57.4%, underscoring the escalating demand for KTOS options.

  • Akamai Technologies, Inc. (NASDAQ:AKAM), on the other hand, is down 3.8% at $45.87. Option traders are scooping up AKAM puts ahead of the company's turn in the earnings confessional Wednesday night, with intraday volume at six times the norm. More specifically, bears appear to be purchasing to open the in-the-money weekly 2/7 47-strike put, which is the most active option with more than 700 contracts exchanged. Most of the puts have gone off on the ask side, volume has exceeded open interest at the strike, and implied volatility was last seen 34.1 percentage points higher.

  • After notching a new annual high of $4.58 in early trading, Zynga Inc (NASDAQ:ZNGA) is fractionally lower at $4.39. Total option volume is nearly twice the intraday average, with around 45,000 calls and 42,000 puts exchanged. Short-term bulls seem to be buying the February 4 call to open, while longer-term traders appear to be selling to open the January 2015 3-strike put. By writing the puts to open, the traders expect ZNGA to remain north of $3 through January 2015 options expiration, rendering the contracts worthless, and allowing the sellers to pocket the initial premium received from the sale. Elsewhere on the Street, analysts at BofA-Merrill Lynch this morning downgraded the outperformer to "underperform" from "neutral."


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