FireEye, Inc. (FEYE) Bulls Bet On a Round-Number Breakout

FireEye Inc (FEYE) is higher today, on news of a security breach at Anthem Inc (ANTM)

by Karee Venema

Published on Feb 5, 2015 at 11:04 AM
Updated on Apr 20, 2015 at 5:32 PM

A massive security breach at Anthem Inc (NYSE:ANTM) has shares of cybersecurity firm FireEye Inc (NASDAQ:FEYE) -- as well as its sector peer Cyberark Software Ltd (NASDAQ:CYBR) -- soaring. At last check, FEYE was up 5.2% at $36.30, and options traders are responding in kind. In fact, calls are trading at almost five times what's typically seen at this point in the day, and are outpacing puts by a nearly 3-to-1 margin.

Most active is FEYE's June 40 call, where buy-to-open activity has been detected. By initiating the long calls, speculators are gambling on the equity to break out above the round-number $40 mark by June options expiration. Amid today's surge, delta on the call has risen to 0.45 from 0.40 at last night's close, signaling an increased probability the option will expire in the money.

Today's call-skewed session just echoes the growing trend seen in FEYE's options pits. Specifically, over the past week, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio has jumped to 5.36 from 3.89. What's more, the current ratio ranks in the 79th percentile of its annual range, meaning calls have been bought to open over puts at a faster-than-usual clip.

However, there is still plenty of room on the bullish bandwagon. Of the 20 analysts covering the shares, eight maintain a "hold" or "strong sell" rating, versus 12 "strong buys." Plus, the average 12-month price target of $38.15 stands at a slim 5.1% premium to current trading levels. Should FireEye Inc (NASDAQ:FEYE) extend its 15% year-to-date lead, a round of upgrades and/or price-target hikes could translate into a fresh wave of buying power.


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