M&A Buzz Fuels Bullish Betting on FireEye Inc (FEYE)

FireEye Inc (NASDAQ:FEYE) is higher today, after Symantec Corporation's (NASDAQ:SYMC) $4.7 billion purchase of Blue Coat Inc.

by Karee Venema

Published on Jun 13, 2016 at 11:35 AM

M&A Monday has started off with a bang, as news of Microsoft Corporation's (NASDAQ:MSFT) big buyout of LinkedIn Corp (NYSE:LNKD) sweeps the Street. Elsewhere in the tech sector, Symantec Corporation's (NASDAQ:SYMC) roughly $4.7 billion purchase of privately held Blue Coat is helping to lift shares of fellow cybersecurity firm FireEye Inc (NASDAQ:FEYE) -- which has invited its own set of takeover rumors recently -- and options traders are responding to FEYE stock in kind.

Specifically, FEYE call options are crossing at three times what's typically seen at this point in the day, and are outpacing put options by a nearly 16-to-1 ratio. Most active by a mile is FEYE's September 18 call, where it seems safe to assume new positions are being purchased. In other words, call buyers are betting on FEYE stock to rally north of $18 by the close on Friday, Sept. 16 -- when the monthly options series expires.

Today's accelerated call activity just echoes the withstanding trend seen in FEYE's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 10.30 rests just 5 percentage points from a 52-week peak.

What's more, FEYE's Schaeffer's put/call open interest ratio (SOIR) of 0.20 ranks lower than all other comparable readings taken in the past year. Simply stated, speculative players are more call-heavy now toward FEYE than they've been at any other point during the past year.

Drilling down on the front-month series of options, peak call open interest of 5,317 contracts is currently located at FEYE's June 15 strike. According to the major options exchanges, a healthy portion of this activity has been of the buy-to-open kind, meaning traders expect the stock to settle north of $15 at this Friday's close, when the series expires.

At last check, FEYE was up 1.9% at $16.11. Longer term, shares of FireEye Inc (NASDAQ:FEYE) have shed 70% year-over-year, with the formerly supportive $16.50-$17.00 region now serving as resistance. As such, today's buy-to-open activity at the out-of-the-money September 18 call could be a result of short sellers hedging against any additional upside. Short interest accounts for a healthy 12.5% of FEYE's available float.

FEYE daily chart

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