Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Juniper Networks Sees Upbeat Options Action

Breaking down an April-dated options spread on uptrending JNPR

by 12/6/2012 12:46 PM
Stocks quoted in this article:

The shares of Juniper Networks, Inc. (NYSE:JNPR - 18.83) are trading higher at midday, and are poised to finish atop their 200-day moving average for just the second time since mid-2011. Against this backdrop, it looks like one speculator is gambling on more upside for JNPR over the long term, and is using both calls and puts to bet bullishly.

So far today, JNPR has seen roughly 16,000 calls and 8,200 puts change hands, far exceeding its average intraday volume of around 1,800 calls and 850 puts. A healthy portion of the action centered on the April 20 call and April 16 put, where symmetrical blocks of several thousand contracts traded. The calls crossed at the ask price of $1.18, suggesting they were bought, while the puts traded at $0.81 each -- closer to the bid price, implying they were likely sold.

Since volume has exceeded open interest at both strikes, it looks like the trader implemented a split-strike version of the synthetic long stock strategy for a net debit of $0.37 per pair of options. In simpler terms, the investor is expecting JNPR to surmount the $20 level within the next few months, but reduced the cost of the calls -- and trimmed his breakeven level -- by selling out-of-the-money puts.

Now, the speculator will profit as long as JNPR topples the $20.37 level (call strike plus net debit) within the options' lifetime. However, should the stock breach the $16 level by April expiration, the sold puts could obligate him to buy JNPR shares at $16 apiece -- a premium to what he'd pay on the Street.

Broadening our sentiment scope, JNPR is no stranger to the affection of the options crowd. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have purchased nearly five calls for every put during the past two weeks. Plus, the stock's 10-day call/put volume ratio of 4.58 stands higher than two-thirds of all other readings of the past year, hinting at a healthier-than-usual appetite for long calls of late.

On the other hands, the brokerage bunch remains wary of JNPR. Currently, the security boasts just eight "buy" or better ratings, compared to 20 tepid "hold" suggestions. Likewise, the average 12-month price target on the stock rests at $18.82, representing a discount to JNPR's current share price.

At last check, JNPR has advanced 2.5% to wink at the $18.83 level. As alluded to earlier, the equity is set to end atop psychological resistance at its 200-day trendline, which has rejected several advances over the past 18 months.

Daily Chart of JNPR since February 2012 With 200-Day Moving Average


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.