Bullish Options Traders Cheer On Rallying Box Stock

BOX stock is trading at a two-year peak

Oct 20, 2017 at 2:09 PM
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Shares of cloud content management specialist Box Inc (NYSE:BOX) are exploding higher today. The stock was last seen up 5% at $21.62, earlier touching a two-year high of $21.76. This is just more of the same from BOX, which shot higher last Friday thanks to a price-target hike to $25 at Canaccord Genuity, and gained more momentum on Wednesday on news the Food and Drug Administration (FDA) chose the company to modernize its technical infrastructure. Not only is Box stock up over 43% during the past year, but this recent push higher may have been very profitable for options traders.

For example, the security has a 10-day call/put volume ratio of 21.07 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- indicating more than 21 call options have been bought to open for every put. This ratio ranks in the 89th annual percentile, showing such a preference for long calls over puts is quite unusual.

Looking closer, the November 20 call saw the largest increase in open interest during this time frame, adding more than 2,101 contracts -- more than twice the next closest strike. Data from the major options exchanges confirms buy-to-open activity here, confirming bullish expectations.

In today's trading, calls are again popular, with volume running at nine times the expected pace. The most popular contract is the in-the-money October 19 call, where it appears traders are closing positions amid today's rise in BOX shares. Meanwhile, new positions are likely being added at the December 23, 24, 26, and 27 calls, where bulls may be betting on even more upside from the stock in the coming months.

Despite the equity's sharp rise on the charts, options data suggests it's still not too late to speculate. For example, Box has a Schaeffer's Volatility Index (SVI) of 29%, which is only 9 percentage points from a 12-month low. This is reinforced by the equity's 30-day at-the-money implied volatility, which at 30.7% ranks in the low 17th annual percentile. Both these indicators suggest lower-than-normal volatility expectations are being priced into near-term options.

Looking elsewhere, options traders aren't the only ones bullish on BOX stock. By the numbers, 80% of those in coverage say to buy the shares -- though the security is quickly approaching its average 12-month price target of $24.45. As such, the stock's rise could be met with additional price-target hikes.

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