Unusual Options Activity: FireEye (FEYE)

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  • Shares of cybersecurity firm FireEye (FEYE) dropped on news of a massive hack before turning around on Friday. At least one trader sees shares moving even higher.

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  • That’s based on the January 2021 $19 calls. With 25 days until expiration, over 21,100 contracts traded, a 121-fold rise in volume from the prior open interest of 174. The trader paid about $0.33 for the contracts.

    With shares jumping to $19 on Friday, the option has become the at-the-money trade.

    A 30 percent jump in shares on Friday sent the price of the stock to a level last seen in August before shares sold off, and a post-Covid meltdown high for shares.

    Should the company come out a winner following the hacking news, however, it’s possible shares could trend higher.

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  • Action to take: The January option is a decent speculation, as it could double or better from here depending on how shares move. But traders also risk a total wipeout on the trade, given the short timeframe and the fact that shares may give up some of their large one-day gain. And, given the late-day move in shares, you’ll have to pay more than the trader who went in, meaning they may be selling their options to you at a profit.

    Speculators may want to get into the trade, looking for a mid-double-digit return as a price point for taking profits. Traders interested in the space should still consider a call option on FireEye, but one with a further strike date such as March 2021.