Amazon Buzz Sets Off Fabrinet Stock Options Trading

FN shares could find a floor in the low $40 region

Jun 26, 2017 at 2:33 PM
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Shares of OEM manufacturing expert Fabrinet (NYSE:FN) are surging today, last seen up 14% at $45.63, thanks to reports the company has partnered with Amazon to produce optical modules. FN is on pace for its highest close since late February, and has taken out some key technical levels in the process. Plus, the tech stock has caught the eye of options traders, with call volume already more than doubling its former 52-week high. 

FN Stock Blows Past $40, 200-Day

Starting on the charts, Fabrinet stock is now trading above the round $40 level, where it topped out Friday. This area is also home to one of Wall Street's favorite technical indicators, the 200-day moving average, marking the first time FN has topped this trendline since early April. Plus, the $40.82 and $42.90 marks represent Fibonacci retracements of 50% and 61.8%, respectively, of the stock's fall from its February all-time high to its 2017 bottom. Overall, the shares could now have solid region of chart support beneath them. 

fn stock today

Fabrinet Options Volume Explodes

As mentioned before, call volume is much higher than normal today on FN, running at an amazing 67 times the expected rate. Much of the attention has been paid to just two contracts: the July 46 and October 48 calls. There's clear buy-to-open activity taking place at the July calls, while data isn't as clear for the October series. Either way, anyone buying to open the contracts are expecting Fabrinet stock to extend its run higher, while call sellers would be betting on the strikes acting as near-term resistance. 

Generally speaking, FN isn't a name that sees a lot of options trading, but those who are speculating on the tech stock have preferred long calls over puts. This is evidenced by its 50-day call/put volume ratio of 4.85 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). 

As it stands now, it seems to make more sense to buy Fabrinet options than to sell them. For example, FN has a Schaeffer's Volatility Index (SVI) of 37%, which ranks in the low 16th percentile of its annual range. This suggests options premium for near-term contracts is low, from a historical volatility standpoint. 

FN Stock Rewards Bullish Analysts

Meanwhile, analysts may not be surprised by Fabrinet's move today. All six of the brokerage firms with coverage on the shares deem them a "strong buy." Moreover, FN stock's average 12-month price target is at $52.55 -- in record-high territory, and 15% above the stock's current price. 


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