FireEye Inc, Palo Alto Networks Inc Option Traders Aim For More Pain

Cybersecurity stocks FireEye Inc (FEYE) and Palo Alto Networks Inc (PANW) are getting crushed

Feb 5, 2016 at 2:34 PM
facebook twitter linkedin

The broad market is feeling the pain this afternoon, and cybersecurity stocks are right there with it. The PureFunds ISE Cyber Security ETF (HACK), for instance, has tanked 4.8%, charting territory not seen since August. In terms of individual stocks, FireEye Inc (NASDAQ:FEYE) and Palo Alto Networks Inc (NYSE:PANW) are both getting crushed, sending put volume through the roof.

At last check, FEYE has dropped almost 11% at $13.11, and earlier hit a record low of $13.04. As such, the shares are on the short-sale restricted (SSR) list, and traders seeking alternative avenues to bet bearishly are rushing to the options pits, where puts are crossing at triple the usual intraday rate.

Digging deeper, the most active FEYE option is the weekly 2/12 13.50-strike put. It appears some buy-to-open activity is transpiring here, suggesting traders think the shares have more downside potential through next Friday's close, when the series expires. Ahead of expiration, the company will report fourth-quarter earnings -- specifically, after the close next Thursday, Feb. 11.

This represents a change of pace for FireEye Inc, as call buyers have been on the prowl in recent days. Specifically, during the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open five times as many calls as puts. The resultant call/put volume ratio of 5.03 ranks in the 82nd percentile of its annual range. Should these bulls begin to hit the exits, FEYE could encounter even more selling pressure.

Meanwhile, puts have been the options of choice in PANW's options pits. The stock's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.92 ranks in the top quartile of its annual range. This trend is continuing today with the shares SSR, as puts are changing hands at five times the expected intraday speed and easily outstripping calls. In the lead is the March 105 put, which traders are buying to open in the hopes PANW will breach $105 -- territory not explored since November 2014 -- by back-month expiration, at the close on Friday, March 18.

On the charts, Palo Alto Networks Inc has surrendered over 12% to hover near $127.50. Since their most recent high of $193.11 in early December, the shares have plunged by 34%, and are now poised to close below their 100-week moving average for the first time ever.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!