Unusual Options Activity: Cloudera, Inc (CLDR)

Bet on shares heading higher.

  • Special: Wall Street Buying Frenzy on Under $5 Stock
  • Shares of Cloudera (CLDR) may be heading higher between now and February, based on a surge of the $5 call options there.

    On Thursday, over 8,200 of the calls traded against a prior open interest of 123—a 67-fold surge in volume. With shares trading at $5.50, the options are also about 10 percent in-the-money, meaning they should move penny-for-penny, less the decline in the time premium.

    Cloudera provides data analytic and management products, operating both a subscription and service-based systems. It provides data and storage solutions for private cloud systems, as well as services to collect and analyze data and provide network security.

    The company has strategic partnerships with companies such as Intel, IBM and Hitachi. In the past year, shares have traded between $4.90 and $20, and are currently around $5.50, about a 75 percent decline from the most recent 52-week high.

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  • Action to take: A large, in-the-money trade is a sign of a trader looking to profit from the upside in a company while also allowing for some market fluctuation. With this option trading around $1.47, shares would need to trade closer to $6.50 between now and February to offset the loss in time premium. Given how high shares have traded in the past, this looks like an easily achievable goal.

    A surge to, say, $10, would lead to the option being worth $5, for about a $3.50 profit, or about a 133 percent return. With those odds, this trade looks particularly attractive.