One of the hottest stocks in the market is FireEye Inc (NASDAQ: FEYE). The heat isn’t coming from bulls accumulating stock shares but rather large positions being built in the options market for this week’s expiration and next week’s expiration. While the stock hasn’t exactly broken out yet, the building option interest is something that may play out in a very bullish way soon.
FireEye is a cloud security company that beat analyst estimates by a wide margin for last quarter and has consistently beaten analyst estimates by double-digit margins for the past four quarters. The company’s analyst estimates have been upgraded significantly following the announcement and the stock jumped substantially. Since the announcement, the price has continued to trade within the range of the post-earnings gap day.
While the price has been rangebound, the options market has been building bullish positions. Last week, there were three days that had unusual option activity where call options were bought. Two of the three days it involved the 14 AUG 20 expiration. While the expiration is tomorrow, option traders will frequently roll the options to give them more time.
So far this week, there was unusual activity on Wednesday and then again yesterday. Thursday saw significant interest on the 21 AUG 20 $15.50 call option. Over 17,000 contracts traded against an option interest of 3,585 for an average price of around $0.25.
Action to Take: With the stock testing support, it provides an opportunity to trade the price to the resistance near $16.25. If the price breaks through the resistance, the price will likely retest the 52-week high near $18.50.
Option traders may want to consider buying an 18 SEP 20 15/16 long call vertical for around $0.35.