Sector Follows FireEye Inc (FEYE) South on Bearish Note

FireEye Inc (FEYE) and Cyberark Software Ltd (CYBR) are among the cybersecurity stocks taking it on the chin

by Alex Eppstein

Published on Oct 23, 2015 at 2:19 PM
Updated on Oct 23, 2015 at 2:19 PM

Cybersecurity stock FireEye Inc (NASDAQ:FEYE) is bucking the broad-market trend higher in a big way, and taking peer Cyberark Software Ltd (NASDAQ:CYBR) with it. In fact, FEYE was last seen down 7.8% at $27.07 -- after hitting an annual low of $26.73 -- on the heels of a Wedbush downgrade to "neutral" and price-target cut to $32. Explaining its rationale, the brokerage cited growing competition from Palo Alto Networks Inc (NYSE:PANW).

Not everyone's mourning FEYE's blood-letting, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have been placing bearish bets at a faster-than-usual pace in recent months. Specifically, the stock's 50-day put/call volume ratio of 0.63 ranks just 11 percentage points from a 12-month high. As a result, FEYE's Schaeffer's put/call open interest ratio (SOIR) of 0.94 registers above 90% of comparable readings from the past year, hinting at a pronounced preference for short-term puts over calls.

Likewise, short sellers may be capitalizing on the sell-off. Over 20 million FEYE shares are sold short, or over 14% of its outstanding float. 

As alluded to, CYBR is following in the bearish footsteps of FireEye Inc, down 3.3% at $45.79. On a year-to-date basis, though, the former -- helped by recent buyout speculation -- is still sitting on a gain of 15.5%, as well as historical support in the $45 area.

Last-minute speculators are counting on a bounce for the stock by today's close. Cyberark Software Ltd's most active option is the weekly 10/23 48-strike call, with likely buy-to-open activity transpiring. In other words, buyers believe CYBR will topple the out-of-the-money strike by the closing bell, when the weekly series expires.

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