Options Bears Target Data Stock After Ransomware Incident

The equity is up over 41% year-over-year, however

Digital Content Manager
Sep 10, 2020 at 10:46 AM
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The shares of Equinix Inc (NASDAQ: EQIX) are down 1.2% at $744.14 this morning, after the data giant said it is investigating a security incident involving ransomware on some of its internal systems. The company noted its data centers and service offerings remain fully operational, and that the incident did not have an impact on most customers' operations or data.

On the charts, the security has been cooling off from its all-time-high of $805.81 on Aug. 10. Though the stock was able to sustain that level for a couple of weeks, shares are now slipping below the once supportive 50-day moving average, which is now keeping a tight lid on the security. Before this recent drop, however, Equinix shares had been breaking records on a monthly basis. Longer term, the security is still doing well with a 41% year-over-year lead.

Analysts are optimistic towards EQIX, with 17 of the 20 in coverage sporting a "buy" or better rating, and only three carrying a tepid "hold." Meanwhile, the equity's 12-month consensus target price of $829.26 is a 10% premium to its current perch.

That optimism is reflected in the options pits, where calls are all the rage. The security sports a 10-day call/put volume ratio of 7.07 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 99th percentile of its annual range. This suggests a healthier-than-usual appetite for bullish bets of late.

Today's news may be shifting the tide, however. While volume is still incredibly low, 124 puts have crossed the tape so far, which is three times the average intraday amount, and more than five times the number of calls traded. Most popular is the monthly December 400 put, followed by the 500 put in the same series.

Traders looking to speculate on Equinix stock's near-term trajectory should consider options. The security's Schaeffer's Volatility Index (SVI) of 33% sits in the 18th percentile of its annual range, suggesting short-term options are pricing in relatively low volatility expectations. In other words, the stock's near-term options are attractively priced at the moment.


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