Options Traders Pile On as Benefitfocus, Inc. (BNFT) Soars

Benefitfocus Inc (BNFT) options volume is running at 30 times the average intraday pace

Feb 25, 2015 at 1:12 PM
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Benefitfocus Inc (NASDAQ:BNFT) is soaring today amid a number of well-received fundamental developments. For starters, the software firm unveiled a slimmer-than-expected fourth-quarter loss. More notably, however, is news that Mercer -- a division of Marsh & McLennan Companies, Inc. (NYSE:MMC) -- has taken a nearly 10% stake in BNFT. Against this backdrop, the stock is up 62% at $37.25, and options volume has soared to 30 times what's typically seen at this point in the day.

By the numbers, 2,590 calls have changed hands, compared to 2,542 puts. Most active is the equity's March 35 call, with all signs suggesting buy-to-open activity. By initiating these long calls, speculators expect BNFT to extend its lead north of the $35 mark through the close on Friday, March 20, when the contracts expire.

Widening the sentiment scope reveals long calls have been popular on a stock that was staring at a 65.7% year-over-year deficit heading into today's session. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 187.4 calls for each put over the past 10 sessions. However, with 14.6% of the equity's float sold short -- representing nearly 14 sessions' worth of pent-up buying demand, at average daily trading volumes -- some of this call buying may be a result of shorts hedging against any unexpected upside.

Outside of the options arena, the brokerage bunch has been quite enamored with Benefitfocus Inc (NASDAQ:BNFT). In fact, 80% of covering analysts maintain a "strong buy" rating toward the stock, and the average 12-month price target of $46.21 more than doubles last night's close at $22.97. What's more -- similar to fellow software developer FleetMatics Group PLC (NYSE:FLTX) -- the equity received some upbeat analyst attention today. Specifically, RBC boosted its price target by $6 to $32, while Jefferies raised its target price to $36 from $33.50.


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