Ciena Corporation (CIEN) and the $1.1 Million Pre-Earnings Bet

Ciena Corporation's (CIEN) March 20 call is in focus today

by Karee Venema

Published on Feb 24, 2015 at 2:22 PM
Updated on Jun 24, 2020 at 10:16 AM

Ciena Corporation (NYSE:CIEN) is following the bullish footsteps of the broader equities market today, and was last seen 1.7% higher at $20.37. The positive price action has sparked a rush of call activity in the equity's options pits, with the contracts crossing the tape at a rate 18 times the intraday average, and outpacing puts by a more than 47-to-1 ratio. Meanwhile, CIEN's 30-day at-the-money implied volatility has jumped 6.7% to 48%, signaling elevated demand for short-term options.

Specifically, the stock's March 20 call has received the most attention, due to a massive block of 10,000 contracts that changed hands earlier. According to Trade-Alert, these calls were bought to open for an initial cash outlay of $1.12 million (number of contracts * $1.12 premium paid * 100 shares per contract) -- and will create the largest block in open interest on CIEN.

The net debit is the most the speculator stands to lose, should the equity settle south of the round-number $20 mark at the close on Friday, March 20 -- a time frame which includes the company's upcoming earnings report, slated for the morning of Thursday, March 5. Meanwhile, profit will accumulate on a move north of the at-expiration breakeven mark of $21.12 (strike plus the premium paid).

Today's heavier-than-usual call activity runs counter to the withstanding trend seen in CIEN's options pits. 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 1.68 ranks in the 92nd annual percentile. Echoing this is Ciena Corporation's (NYSE:CIEN) Schaeffer's put/call open interest ratio (SOIR) of 0.92, which rests higher than 90% of similar readings taken in the past year.


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