LifeLock, Inc. (LOCK) Option Bulls React to Rumor Mill

Lifelock Inc (LOCK) calls are trading at nearly five times the average intraday pace

Jan 28, 2015 at 2:27 PM
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Lifelock Inc (NYSE:LOCK) was up nearly 3% at its session peak -- amid unconfirmed rumors the security specialist could be a takeover target -- but was last seen down 1.3% at $14.77. Options traders are keeping the faith, though, and are scooping up calls at a rate nearly five times the average intraday pace. Additionally, the equity's 30-day at-the-money implied volatility is up 8.2% at 52.7%, signaling elevated demand for LOCK's short-term options.

Specifically, nearly all of the day's call volume has centered on the February 16 strike, where the majority of positions have been bought to open. By purchasing the calls, traders are gambling on a move north of $16 by the close on Friday, Feb. 20 -- when the options expire -- a time frame which encompasses the company's next quarterly earnings report, slated for release the evening of Tuesday, Feb. 10.

From a wider sentiment perspective, options traders have been migrating toward the bearish side of the aisle in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.79 ranks in the 68th annual percentile. Even more telling is LOCK's Schaeffer's put/call open interest ratio (SOIR) of 6.71, which rests just 1 percentage point from an annual peak. In other words, short-term speculators have rarely been as put-skewed toward LOCK as they are now.

Looking at the charts, it's easy to see why speculators have been quick to wave the skeptical flag. Since the start of the year, the shares have surrendered more than one-fifth of their value. What's more, Lifelock Inc (NYSE:LOCK) has found a stern layer of resistance from its 160-day moving average over the past several weeks.

Daily Chart of LOCK Since January 2015 With 160-Day Moving Average
 

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