FireEye, Inc. (FEYE) Put Players Pile On as Rumor Mill Churns

FireEye Inc (NASDAQ:FEYE) hit an annual high earlier as M&A rumors ramped up

by Karee Venema

Published on May 28, 2015 at 1:58 PM
Updated on May 28, 2015 at 2:11 PM

It seems as if FireEye Inc (NASDAQ:FEYE) can't be stopped. Today, the shares hit a new 52-week peak of $47.18, and were last seen up 4.6% at $47.1. Stoking the bullish bias is an upwardly revised offering -- which has some speculating once again about a potential takeover -- and possibly recent hacks at Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) and the IRS, all of which may be discussed at next Wednesday's analyst meeting. However, not everyone is convinced the stock can continue its run, with a number of option traders eyeing an end-of-week pullback.

Taking a quick step back, FEYE puts are trading at two times the average intraday pace today. The equity's weekly 5/29 46-strike put is seeing heavy action, and it appears eleventh-hour speculators are purchasing new positions here. Amid today's rally, delta on the now out-of-the-money put has moved to negative 0.29 from negative 0.72 at last night's close, signaling a decreased probability of an in-the-money finish at tomorrow's close, when the contracts expire. 

Widening the scope reveals put players have been more active than usual in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FEYE's 50-day put/call volume ratio of 0.39 ranks in the 69th percentile of its annual range. While some of this put buying may be a result of shareholders protecting paper profits, skepticism toward FEYE is seen outside of the options pits, as well.

In fact, 11.6% of the stock's float is sold short, representing over four days' worth of pent-up buying demand, at FireEye Inc's (NASDAQ:FEYE) average daily pace of trading. Plus, more half of analysts covering the shares maintain a "hold" or worse recommendation. Should FEYE extend its trek in annual-high territory, an unwinding of the pessimism surrounding it could translate into additional gains.

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