Shorts may be using FEYE call options to hedge
Last night, Business Insider reported FireEye Inc (NASDAQ:FEYE) hired Goldman Sachs as an advisor for a potential sale. While the report indicated talks were in the early stages, that hasn't stopped FireEye stock from popping this morning, up 2.5% to trade at $14.16. Additionally, SunTrust Robinson weighed in, initiating coverage on the cybersecurity stock with a "hold" rating and $15 price target.
FireEye stock hasn't traded at the $15 level since an late-July bear gap. The security went on to tag a two-year low of $12.66 two weeks later on Aug. 14. Today's pop takes the shares right back up to their 80-day moving average, a trendline that contained a bounce from that mid-August bottom.
The options pits indicate a clear preference for calls lately. In the last 10 days, 28,976 calls were bought to open at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 501 puts. Plus, this ratio ranks 4 percentage points from an annual high, pointing to a healthier-than-usual appetite for long calls over puts in the last two weeks.
However, short interest increased by 14.5% in the two most recent reporting periods to 20.53 million shares, the most since November. This accounts for a healthy 11.3% of FEYE's total available float, and it's possible that some of this recent call buying could be shorts seeking an options hedge against any additional upside risk.