Role Reversal: The Cyberattack That's Sending Cybersecurity Stocks Lower

FireEye Inc (NASDAQ:FEYE), Cyberark Software Ltd (NASDAQ:CYBR), and Palo Alto Networks Inc (NYSE:PANW) are all lower today -- but that might not be the case for long

Jul 7, 2015 at 3:04 PM
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Cybersecurity stocks, like much of the broader market, are taking a hit today. Shares of FireEye Inc (NASDAQ:FEYE), Cyberark Software Ltd (NASDAQ:CYBR), and Palo Alto Networks Inc (NYSE:PANW) are all decidedly lower, after Hacking Team, an Italian company that provides hacking software for governments, was, in fact, hacked. This is the rare scenario when a company getting hacked isn't a boon for stocks such as FEYE, CYBR, and PANW.

Looking at FEYE first, the stock has dropped 1.9% today to trade at $47.11. However, the stock has outperformed the S&P 500 Index (SPX) by almost 18 percentage points during the past two months, and recently touched an annual high. Even so, plenty of traders have been placing bearish bets. FEYE's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.67 is only 3 percentage points from an annual bearish extreme -- and it doesn't look like option traders are switching sides any time soon. Puts are crossing at twice the expected intraday pace today, while accounting for all 10 of FEYE's most popular strikes.

CYBR, meanwhile, is even worse off, slipping 3% to $56.31 -- though it's pared some of its earlier losses, when it was down as much as 8.3%. Like FEYE, CYBR has been brilliant on the charts, registering a year-to-date lead of 46.4% coming into today. And also like FEYE, bearish option traders have been going after the stock. During the past 10 days at the ISE, CBOE, and PHLX, more puts have been bought to open than calls. Today, though, things are different, with overall call volume running at 1.3 times the expected afternoon pace, thanks to heavy interest in the July 55 call -- which is seeing buy-to-open activity.

Then there's PANW, which has also erased some early losses, but still finds itself in a 2.6% hole today at $170.82 -- despite a price-target hike to $210 from $180 at Dougherty & Company. Still, the shares have easily doubled in value over the past 52 weeks -- and touched an all-time high of $185 on June 22 -- although you wouldn't assume that from the long-term behavior of the security's option traders. Over the past 10 weeks, 1.11 puts have been bought to open for each call at the ISE, CBOE, and PHLX. This 50-day put/call volume ratio is higher than nearly three-fourths of similar readings from the past year. Today, it looks like buy-to-open activity is transpiring at PANW's July 162.50 put. 

Going forward, FireEye Inc (NASDAQ:FEYE), Cyberark Software Ltd (NASDAQ:CYBR), and Palo Alto Networks Inc (NYSE:PANW) all have potential to run higher. If the stocks can resume their long-term uptrend, an unwinding of the pessimistic trading patterns surrounding them could result in tailwinds. 

 

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