FireEye, Inc. (FEYE) Call Volume Pops Amid Confirmed ISIS Hack

FireEye Inc (FEYE) calls are trading at two times the intraday average

by Karee Venema

Published on Jan 12, 2015 at 2:02 PM
Updated on Apr 20, 2015 at 5:32 PM

FireEye Inc (NASDAQ:FEYE) is 4.6% higher at $35.20 -- and is extending Friday's analyst-induced upside -- as news of a confirmed hack by ISIS against the U.S. military's Twitter Inc (NYSE:TWTR) and YouTube accounts overlaps President Barack Obama's latest cybersecurity proposals. Against this backdrop, FEYE calls are crossing the tape at more than two times the intraday average, and are outpacing puts by a nearly 7-to-1 margin.

While the stock's January 2015 35-strike call is most active, there appears to be a mix of buying and selling activity here. What's more clear-cut is the action occurring at the January 2015 35.50- and weekly 2/13 42-strike calls, with all signs suggesting new positions are being purchased. By buying the calls to open, traders expect FEYE to settle north of the strikes by the respective expiration dates -- the latter of which encompasses the company's turn in the earnings confessional, the evening of Wednesday, Feb. 11.

Today's heavier-than-usual call volume just echoes the withstanding trend seen in FEYE's options pits. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.85 ranks higher than 71% of similar readings taken in the past year. There could be an ulterior motive to this call buying, though, considering 15.3% of the equity's float is sold short. In other words, short sellers may be initiating long calls to "insure" their bearish bets against any upside.

Regardless of the reason, now is an opportune time to bet on FireEye Inc (NASDAQ:FEYE) at a bargain. The security's Schaeffer's Volatility Index (SVI) of 49% ranks lower than 91% of similar readings taken in the past year, suggesting the equity's short-term options are currently pricing in rather low volatility expectations.


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