Cognizant Technology Solutions Corp (CTSH) Surge Has Options Bulls Buzzing

Cognizant Technology Solutions Corp (NASDAQ:CTSH) is trading higher after Elliott Management sent a "value-proposition" letter to its board of directors

Nov 28, 2016 at 10:56 AM
facebook X logo linkedin


Shares of Cognizant Technology Solutions Corp (NASDAQ:CTSH) are soaring, after the IT firm received a letter from Elliott Management that lays out a "value-enhancement plan." Specifically, the activist investor -- which owns a 4% stake in CTSH -- requested a meeting with Cognizant Technology's board of directors to detail its goal of achieving a value of "$80-$90+ per share by the end of 2017, representing upside of 50-69 percent in just over a year."  At last check, CTSH stock was trading up 8.5% at $57.79 -- the top percentage gainer on the S&P 500 Index (SPX) -- and its options pits were bustling, with calls once again outpacing puts.

Drilling down, roughly 7,400 call have traded, compared to fewer than 2,200 puts -- five times CTSH's expected intraday options volume. Most active is the weekly 12/2 59-strike call, where it appears new positions are being purchased. If this is the case, call buyers expect the tech stock to extend today's upside over the next several sessions, and break out above $59 by Friday's close, when the weekly series expires.

This call-skewed trading is nothing new in CTSH's options pits, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day call/put volume ratio of 2.74 ranks just 8 percentage points from a 52-week peak. Simply stated, calls have been bought to open over puts at a near-annual-high clip in recent months.

What's more, CTSH call open interest of 93,497 contracts is docked at a 52-week peak, compared to 46,990 put options outstanding -- in the 87th percentile of its annual range. Most of this call activity has been centered at CTSH's January 2017 55-strike and April 55 calls -- the stock's top two open interest positions -- where a collective 53,105 contracts currently reside. Based on data from Trade-Alert and the major options exchanges, there's been some notable buy-to-open activity at these two strikes, meaning traders were eyeing a move north of $55 over the next several months.

On the charts, CTSH is down 10.5% year-over-year, with any upside attempts quickly contained in the $63 range. More recently, the stock's 200-day moving average has served as a ceiling for the shares, although today's bull gap has shares of Cognizant Technology Solutions Corp (NASDAQ:CTSH) north of here. Should the equity close above this trendline, it would mark the first time CTHS has done so since June 23.

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.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI