Big Printin’ $FEYE, $GLD

by Dan June 21, 2016 3:59 pm • Commentary

Here are what appear to be a couple directional options trades that caught my eye in today’s trade:

GLD: One of the largest trades in the options market today appeared to be a bullish roll in the Gold etf.

When GLD was trading $121.31 a trader sold to close 53,000 Aug 124 calls at $2.53 to close and bought to open 26,500 Dec 124 calls for $4.91, for a net debit of 15 cents.  If this was in fact a roll out of calls, then the new position breaks-even up at $128.91, up about 6% from the trading level.  Interestingly the break-even is just below the two year highs made in June 2014: 

[caption id="attachment_64516" align="aligncenter" width="600"]GLD 1yr chart from Bloomberg GLD 1yr chart from Bloomberg[/caption]

FEYE:  Despite the network security vendor having rallied 40% from its February lows, it is still down nearly 20% on the year, and down nearly 70% from its 52 week highs made last June.  The stock has been subject to some take-over chatter of late, which could be one reason for today’s call volume, which is about 4x average daily volume with most coming in one trade.  When the stock was $16.86 shortly after noon, 20,000 of the Sept 23 calls were bought to open for 39 cents (30,000 have traded on the day). These calls break-even at $23.39 on Sept expiration, up about 39% from the trading level.  Despite very poor analyst sentiment, and high short interest (14%) it’s hard to consider a premium paid for FEYE too far above $25 given their massive earnings losses (expected to be $1.24 adjusted, but $3.25 on a GAAP basis) with sales growth expected to decelerate to 27% in 2016 to about $800 million.

The chart does look like a bit of a coiled spring, but there is also little technical support down to the low teens:

[caption id="attachment_64523" align="aligncenter" width="600"]from Bloomberg from Bloomberg[/caption]