2 Rallying Tech Stocks With Cheap Options

AKAM stock hit a new high earlier, while CTXS came within pennies of a fresh peak

Mar 8, 2018 at 2:07 PM
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Tech stocks are having quite a week, with the Nasdaq Composite (IXIC) flirting with a fifth straight win. Among individual names with notable win streaks are cloud services specialist Akamai Technologies, Inc. (NASDAQ:AKAM) and enterprise solutions firm Citrix Systems, Inc. (NASDAQ:CTXS), and both equities have remarkably cheap options at the moment.

Akamai Technologies Stock Upgraded at Cowen

Akamai Technologies stock is up 5.7% today to trade at $73.98 a new two-year high, after the company agreed to install two directors backed by activist investor Elliott Management, and hiked its share buyback program. An upgrade to "outperform" from "market perform" and price-target hike to $81 from $64 from Cowen and Company is only fanning the bullish flames, with AKAM shares pacing for a sixth straight win.

More bullish brokerage notes could come down the pike for a stock that's up 57% in the last six months, which could create bigger tailwinds. The majority of analysts still maintain a "hold" or "sell" rating, while the average 12-month price target for AKAM stock is $72.05 -- a discount to current trading levels.

And those looking to bet on AKAM's near-term trajectory may want to consider options. The equity's Schaeffer's Volatility Index (SVI) of 27% ranks in the 15th annual percentile, suggesting low volatility expectations are currently being priced into short-term contracts. Plus, the security's Schaeffer's Volatility Scorecard (SVS) is docked at a lofty 90 (out of 100), meaning Akamai Technologies has consistently made big moves on the chart over the past year, relative to the options market's expectations.

Citrix Systems Stock Ripe for a Short Squeeze

Citrix Systems stock has traded on both sides of breakeven today, but was last seen fractionally higher at $94.41 -- and not far from its nearly 18-year high of $95, hit on Jan. 29. Another win today would make it five in a row for the tech shares, though this is nothing new for an equity that had a seven-day win streak in late February -- and boasts a six-month gain of 25%.

In spite of this technical strength, short interest shot up 80.9% in the most recent reporting period to 9.68 million shares -- the most since early December. It's likely some of these bearish bets are underwater, and a round of short covering could push CTXS shares even higher up the charts. In fact, it would take almost a week for shorts to cover, at the average pace of trading.

It's an attractive time to buy premium on short-term Citrix Systems options, too. While the stock's SVI of 23% ranks lower than 92% of comparable readings taken in the past year, its 30-day at-the-money implied volatility of 22.8% is docked in the 19th annual percentile.


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