Option Bulls Bombard FireEye Inc (FEYE) After Big Stock Buy

FireEye Inc (NASDAQ:FEYE) call options are trading at a rapid pace, after the cybersecurity firm's CFO purchased $200,000 worth of shares

May 10, 2016 at 1:52 PM
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It's been an abysmal 12 months for cybersecurity stock FireEye Inc (NASDAQ:FEYE). Since the stock hit an annual high of $55.33 last June, it's dropped over three-fourths of its value, and touched a record low of $11.35 back in February. Today, however, FEYE is sharply higher, and options traders appear to be betting on more upside by week's end.

The most popular FEYE option by a mile is the weekly 5/13 13.50-strike call, followed by the June 13 call. It's likely traders are buying to open positions at both strikes, in anticipation of extended gains from FEYE by the respective expiration dates, at the close this Friday and next. These don't appear to be isolated occurrences, either. At last check, calls accounted for nine of FEYE's 10 most popular strikes. 

Options traders have been targeting the stock's call options for some time. Call buying exploded at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ahead of last week's earnings report. And FEYE's current 20-day call/put volume ratio across these exchanges stands at 4.01 -- meaning call buying has quadrupled put buying during the past month. 

Some of this may be due to short sellers hedging in the lead-up to the company's earnings release, since 10% of FEYE's float is sold short. It would take these bears almost four sessions to cover, at the stock's normal trading volumes. Short interest on FEYE fell by 10.5% over the past two reporting periods, though. 

Elsewhere, analysts have been moving away from the stock since last week's post-earnings sell-off. Yet, while 12 of the 23 covering brokerage firms have issued tepid "hold" ratings on FEYE, the remaining 11 deem it a "strong buy." In a similar vein, the stock's average 12-month price target comes in at $22.41 -- a 66.5% premium to current levels. So, it's possible more negative attention could be forthcoming.

That said, FireEye Inc (NASDAQ:FEYE) is on the rise today, gaining 4.9% at $13.46. Sparking the bullish move, a recent Securities and Exchange Commission (SEC) filing revealed the company's Chief Financial Officer Michael Berry purchased 16,500 shares. On the technical side of things, it doesn't hurt that FEYE's 14-day Relative Strength Index (RSI) settled Monday at 21, well into oversold territory -- meaning the stock may have been due for a short-term bounce. 

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