Short-Term Options Bets Pile Up on FireEye

FEYE has been a favorite of call buyers for a while

Sep 19, 2018 at 2:26 PM
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FireEye Inc (NASDAQ:FEYE) is sitting in an interesting spot on the charts. Not only are the shares right in the middle of their year-to-date range, but they're also trading just above their 50-, 200-, and 320-day moving averages. And with FEYE stock last seen at $16.40, call volume is accelerated, as it appears some traders are betting on a short-term breakout from the cybersecurity specialist.

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With about two hours left in the trading day, FireEye call volume is twice the amount expected for this point in the session, outpacing put volume roughly 26,000 to 4,100. A large chunk of the action has taken place at the weekly 9/28 16.50-strike call, and all signs point to traders buying to open new positions. Going by the volume-weighed average price (VWAP) of 50 cents, these speculators stand to profit on a move up to $17 for FEYE shares (strike plus premium paid).

Call buying has been the strategy of choice for some time in the stock's options pits. Looking at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), call buying has quadrupled put buying in the past 10 days. Going back the last 50 days, call buying has been even more popular, outpacing put buying by more than 8-to-1 during that time. 

At the same time, short interest has been trending higher for months, including an almost 20% jump in the last two reporting periods. This puts FireEye's short interest at 11.4% of its float, or four times the average daily trading volume. One could assume, based off this data, that at least some of the call activity on the security has been from shorts hedging against a big upside move.

For instance, some shorts may be responsible for the out-of-the-money September 20 call sitting high on FEYE's list of top open interest positions. The shares haven't traded above $20 since early 2016.

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