FFIV Options Pits Are Red-Hot on Buyout News

The stock touched a two month low earlier today

Deputy Editor
Dec 20, 2019 at 1:04 PM
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Software developer F5 Networks, Inc. (NASDAQ: FFIV) announced earlier today that it plans to buy privately-held security and anti-fraud company Shape Security for approximately $1 billion in cash. As a result, FFIV stock is down 4.1% to trade at $137.81 and hit a two-month low of $132.50 earlier today, with Cowen warning that the buyout could dilute the company's earnings in the near-term. 

Options players have taken notice today, and surprisingly, calls have been more popular, with 1,480 of these contracts exchanging hands so far, seven times the average intraday amount. The December 135 call -- which expires later today -- is the most popular, with contracts being bought to open here. 

Typically, puts have been popular. According to the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.43 puts were picked up for every call in the past five days. What's more, this ratio sits higher than 90% of all other readings from this past year. 

The brokerage bunch has been quite bearish on the stock as well. Ten of the 14 in coverage call FFIV a "hold" or worse, and the consensus 12-month price target of $155.71 is a modest 13% premium to current levels.

This pessimism isn't all that surprising considering the equity's 14.6% year-to-date deficit. While FFIV did manage to rally off its late-August lows near $121, the stock is quickly drifting back toward this area thanks to recent pressure at the 200-day moving average.. Currently, the equity is in danger of snapping its three-month win streak, down 5.2% in December so far. 

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