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Juniper Networks Bulls Bet Against Resistance

Will JNPR's 32-week moving average stifle its upward momentum?

by 11/27/2012 1:19 PM
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Calls are the options of choice on Juniper Networks, Inc. (NYSE:JNPR - 16.78) in today's session, with the contracts trading at more than double their average intraday volume. At last check, around 4,650 calls have crossed the tape, compared to fewer than 550 puts.

Short-term speculators are honing in on JNPR's December 17 call, which has emerged as the day's most-active strike. Of the 3,659 contracts traded, 93% have done so at the ask price, implied volatility has ticked 2.1 percentage points higher, and volume is outstripping open interest. Summing it all up, it appears new positions are being added here today.

By buying to open the near-the-money 17-strike call, speculators will profit with each step above $17.57 (the strike plus the volume-weighted average price of $0.57) JNPR takes through December expiration. This represents a 4.7% premium to current levels.

Expanding the scope, today's activity is a change of pace for options players, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the stock's 50-day put/call volume ratio of 0.88 ranks in the 99th percentile of its annual range. In other words, puts have been bought to open over calls with more rapidity just 1% of the time within the last year.

On the charts, JNPR has added 4.7% since hitting its month-to-date low of $16.02 on Nov. 16. However, the stock's nearly 21% year-over-year deficit highlights the equity's withstanding technical troubles. Additionally, any recent rally attempts JNPR has made have been quickly rejected by its 32-week moving average, which has ushered the stock steadily lower since mid-April.

Should JNPR fail to topple the aforementioned breakeven level, though, the most today's call buyers stand to lose is the initial premium paid. With implied volatility at the December 17-strike call currently deflated relative to the stock's 20-day historical (realized) volatility (35% vs. 46%), the option players can rest easy knowing the premium they ponied up was comparatively cheap.

In today's session, JNPR has slipped 0.2% to trade at $16.78.


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