VirnetX Holding Corporation (VHC) Volume Spikes on Big Patent Win

AAPL was ordered to pay VHC more than $625 million, fueling major share and options activity

Feb 4, 2016 at 3:02 PM
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Internet security firm VirnetX Holding Corporation (NYSEMKT:VHC) has skyrocketed more than 50% to $7.20 -- and earlier touched an annual high of $9.64 -- after Apple Inc. (NASDAQ:AAPL) was ordered to pay the firm more than $625 million in a patent dispute. VHC stock and options are trading at rapid-fire rates, and more than a few recent speculators could be kicking rocks.

VHC has seen roughly 15.2 million shares change hands today -- about three times its previous annual high, touched in mid-December -- and put and call volume are also on pace for new 12-month peaks. Intraday put volume is running at 14 times the average pace, and call volume is six times the norm.

On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), VHC's 10-day put/call volume ratio of 0.81 stands higher than 85% of all other readings from the past year. In other words, speculators have initiated bearish bets over bullish at a much faster-than-usual clip during the past two weeks. A mass exodus of option bears could translate into added fuel for VHC.

Short-term traders were paying up to bet on VHC, too. The equity's Schaeffer's Volatility Index (SVI) sits at an annual peak of 383%, hinting at historically inflated volatility expectations.

Meanwhile, short interest accounts for more than a quarter of VHC's total available float. At the stock's average pace of trading, it would take nearly nine sessions to buy back these bearish bets -- plenty of fuel for an extended short squeeze.

Even before today's jump, VirnetX Holding Corporation (NYSEMKT:VHC) sported a 14-day Relative Strength Index (RSI) of 71 -- in overbought territory. The shares are now more than 170% higher for 2016, and trading north of their 10- and 20-month moving averages for the first time since March 2013. However, the stock could run into a potential speed bump in the $8 area, which stifled VHC's rally attempts in early 2015.

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