Credit: Shutterstock photoFireEye is running on takeover rumors today, and the option activity is off the charts.
optionMONSTER's Heat Seeker system shows almost 33,000 contracts changing hands in the cybersecurity stock barely halfway through the session. Not only is that triple the average amount, but calls also dominate the flow by a bullish 10-to-1 ratio.
The action was led by the June 45s, which traded 3,500 times for $1.05 to $1.70. Buyers also snapped up 3,400 May 41 calls expiring this Friday for $0.80 to $1.55.
Long calls fix the price where a stock can be purchased, letting investors position for a rally with limited capital at risk. The cheap cost of these options can also produce significant leverage on a percentage basis if shares move higher. (See our Education section)
FEYE is up 4.33 percent to $43.08 in afternoon trading. It's been trapped between $38 and $46 since late February but has often been eyed as a potential takeout target by Cisco Systems. Today's pop results from renewed chatter on that front, especially with CSCO scheduled to report earnings tonight and bringing in Chuck Robbins as its new CEO in July.
Other contracts seeing heavy volume in FEYE today include the May 42.50 calls, bought almost 2,300 times, mostly for $0.45 to $0.80. Some 2,000 of the June 47s were also purchased for $0.85 to $1.15.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
