Options Bulls Profit as FireEye Stock Pops

FEYE traders may be liquidating their October 14 calls

Oct 8, 2019 at 2:42 PM
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FireEye Inc (NASDAQ:FEYE) stock is trading up 3% at $14.27, as the cybersecurity firm hosts its financial analyst day at its annual Cyber Defense Summit. This pop has sparked heavy activity in FEYE's options pits, with volume running at two times what's typically seen at this point.

Most active is the October 14 call, where it looks like bulls may be liquidating the now in-the-money positions. More specifically, it seems a number of these calls were likely bought on Monday, Sept. 30, for roughly $0.33 apiece. Today, the bid price on these front-month calls was last seen at $0.63, suggesting some of these options traders nearly doubled their money.

Long calls have been in high demand on the cybersecurity stock in recent months. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FEYE's 50-day call/put volume ratio of 11.54 ranks in the 98th annual percentile. In other words, calls have been bought to open over puts at an accelerated clip.

Given how heavily shorted FireEye stock is, it's possible shorts have been buying to open calls to hedge against any upside risk. Short interest on FEYE jumped 14.5% in the two most recent reporting periods to 20.53 million shares -- the most since mid-November. This represents nearly 10% of the equity's available float, or 5.8 times the daily trading volume.

Looking at the charts, FEYE shares have been chopping lower since their early November peak of $20.61, and hit a two-year low of $12.66 on Aug. 14. The stock bounced off this region, but the rebound was cut short at its 80-day moving average, while FireEye's 120-day moving average also emerged as resistance earlier this month.

feye stock daily price chart on oct 8

 

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