Options Traders Expect Another Huge Swing From FireEye Stock After Earnings

FireEye has a history of making huge moves after earnings

Jul 31, 2017 at 1:52 PM
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Options traders have historically shown an overwhelming preference for long calls over puts when speculating on FireEye Inc (NASDAQ:FEYE). This is evidenced by the stock's 10-day call/put volume ratio of 3.06 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in just the 30th annual percentile. In other words, call buying has more than tripled put buying in recent weeks, but relatively speaking this is far from extreme activity. However, near-term options traders could be taking a different approach, with FEYE earnings set to hit the Street after the close on Tuesday. 

Specifically, the cybersecurity stock has a Schaeffer's put/call open interest ratio (SOIR) of 1.10, which ranks just 2 percentage points from a 12-month peak. This means that options traders targeting contracts expiring within the next three months are much more put-focused than usual. Overall, put open interest on FEYE ranks in the 97th annual percentile, with 175,305 contracts outstanding.

Looking at options activity during the past 10 days in particular, the August 15 put saw notable activity, with more than 4,200 positions added -- and is now home to peak front-month open interest of 8,655. Data from the major options exchanges points toward significant buy-to-open activity, meaning traders are betting on FEYE stock rallying atop $15 by the close on Friday, Aug. 18, when the contracts expire. 

Bullish or bearish, it certainly appears options traders are pricing in a huge 16.9% swing in Wednesday's session from FireEye, in either direction. This is likely based on FEYE's volatile post-earnings trading history, with the equity sporting single-session post-earnings moves of 12.9%, 15.7%, 12.1%, and 19% in four of the past five quarters. Going back eight quarters, the stock has averaged a one-day move of 11.6% in the session after earnings. 

Outside the options pits, it's worth monitoring FireEye's short interest levels. For instance, short interest on the security peaked at a record high 33.94 million shares back in April, not long after the stock's March 9 record low of $10.35. Since this peak, short interest has dropped 14%, while FEYE shares are up 43% from their all-time low. If these bears continue to throw in the towel, it could produce more tailwinds for the equity.

Strong quarterly results could also prompt a series of bullish analyst attention. As it stands now, just five of the 19 brokerage firms covering FEYE say to buy it, leaving the door wide open for upgrades to come through and help lift the shares. 

FireEye stock has already been outperforming, rallying 24.5% year-to-date to trade at $14.80. And although's trading in the red today -- possibly due to reports of a researcher in India being hacked -- FEYE has found familiar support from its rising 80-day moving average. 

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