Sector Tailwinds Spark Bullish Betting On FireEye Inc (FEYE)

FireEye Inc (FEYE) is having a rare day in the sun, sending bulls into its option pits

Jan 13, 2016 at 11:18 AM
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FireEye Inc (NASDAQ:FEYE) is getting a big boost today as M&A buzz swirls around its sector peer. The upside move has the stock's options pits in overdrive -- especially on the call side of the fence, where intraday volume is at triple the norm. Also, FEYE's 30-day at-the-money implied volatility earlier jumped to an annual high of 91.6%.

Diving right in, the March 22 call is seeing the most action by far, and Trade-Alert suggests traders are opening long positions here. In so doing, these speculators anticipate FEYE will topple $22 by March expiration. However, delta on the deep out-of-the-money option is just 0.32, indicating the options market is giving it a 32% chance of being in the money at expiration.

Over the past 10 weeks, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been extremely call-focused. Specifically, FEYE's 50-day call/put volume ratio rests at a 12-month high of 5.83, with nearly six calls bought to open for each put. Echoing this, at 0.46, the stock's Schaeffer's put/call open interest ratio (SOIR) has never been lower in the prior 52 weeks.

That's a lot of optimism for an underperformer like FireEye Inc (NASDAQ:FEYE). While the shares have added nearly 8% today at $18.13, they're down 67% since notching an annual high of $55.33 in mid-June, and on Monday touched a record low of $16.39. If the stock resumes its longer-term trend lower, a capitulation among bullish option bettors could result in headwinds.
 

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