FireEye, Inc. (FEYE) Breather Sparks Bearish Betting

FireEye Inc (FEYE) is suffering a sympathy swoon, attracting put buyers

by Andrea Kramer

Published on Feb 23, 2015 at 12:19 PM
Updated on Jun 24, 2020 at 10:16 AM

Cybersecurity issue FireEye Inc (NASDAQ:FEYE) is taking a breather along with sector peer Cyberark Software Ltd (NASDAQ:CYBR), which is swooning in the wake of a downgrade. Both stocks have been on fire in 2015, with FEYE boasting a year-to-date gain of 40% -- even with today's 4.2% pullback to $44.20. However, it looks like FEYE's short-term options traders have little faith, with puts trading at 1.8 times the average intraday clip.

The weekly 2/27 43- and 44-strike puts have attracted apparent buy-to-open activity. By purchasing the puts to open, the buyers expect FEYE to breach the strikes by Friday's close, when the weekly options expire. Should the stock remain atop the strikes through the end of the week, the most the buyers are risking is the initial premium paid.

Generally speaking, now is an opportune time to roll the dice with FEYE's near-term contracts. The equity's Schaeffer's Volatility Index (SVI) sits at 49% -- just 8 percentage points from an annual low, suggesting FEYE's short-term options are historically inexpensive right now.

Meanwhile, today's appetite for short-term puts is par for the course for FEYE. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.97 stands higher than 98% of all other readings from the past year, suggesting near-term traders have rarely been more put-biased.

On the charts, FireEye Inc (NASDAQ:FEYE) has outperformed the record-setting S&P 500 Index (SPX) by almost 39 percentage points during the past three months. As such, the stock's 14-day Relative Strength Index (RSI) is docked at 78 -- in overbought territory, suggesting today's rally respite may have been in the cards.


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