2 Names Capitalizing on Glitch-Gate

When a technical glitch brought all United Continental Holdings Inc (NYSE:UAL) flights to a halt on Wednesday, that was bad. Then, things got worse when -- later in the same day, a separate glitch halted trading on the New York Stock Exchange (NYSE). Yesterday, the stakes were raised to a whole new level, when the government confirmed that over 22 million Social Security numbers were stolen in June; and today, TD Ameritrade Holding Corp. (NYSE:AMTD) just announced a "widespread" order-routing issue.

Amid this rash of technical glitches, cybersecurity stocks have been capitalizing. The PureFunds ISE Cyber Security ETF (NYSEARCA:HACK) -- a benchmark fund that includes 31 companies focused on data protection -- is up 0.2% today to trade at $31. What's more, the ETF has rallied more than 24% since opening for trading in mid-November, and as recently as June 22, hit an all-time high of $33.91.

Not surprisingly, call buyers have been flocking to HACK. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the ETF has seen nearly 2,900 calls bought to open, versus roughly 270 puts -- a more than 10-to-1 ratio.

One HACK component that's done particularly well is Palo Alto Networks Inc (NYSE:PANW), which has shot up 2% this afternoon to $178.38. The shares have more than doubled in value year-over-year, and are less than 4% from their record peak of $185 from late last month.

Not everyone's buying the hype, though. During the last two reporting periods, short interest on PANW soared over 21%, and now makes up almost 7% of the equity's total float. A capitulation among these bears could pave the way for a short-covering rally.