Put volume accelerated on Juniper Networks, Inc.
(NYSE:JNPR) on Monday, with the bearishly slanted contracts trading at nearly eight times the average daily pace. By the numbers, roughly 19,000 puts crossed the tape, compared to fewer than 4,800 calls. JNPR's May 19 put was one of the more popular strikes, where more than 6,000 contracts changed hands. All of these went off at the ask price, and open interest soared overnight, pointing to buy-to-open activity.
By purchasing these out-of-the-money puts for a volume-weighted average price (VWAP) of $0.78, traders will begin to profit with each step south of $18.22 (strike price less VWAP) Juniper Networks takes through the close on Friday, May 17, when back-month options expire. At yesterday's close, delta for this position was docked at negative 0.32, or 32%. However, this morning's analyst-induced stumble has delta for the put now perched at negative 0.42, or 42%, suggesting a roughly 2-in-5 chance the position will be in the money by expiration.
Monday's penchant for puts is just more of the same in Juniper's option pits, though, as evidenced by data collected from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the stock's 50-day put/call volume ratio of 0.73 ranks higher than 73% of other similar readings taken in the past year, implying puts have been bought to open over calls at an accelerated clip in recent months.
Even more telling of this put-skewed bias is JNPR's Schaeffer's put/call open interest ratio (SOIR) of 1.64. Not only does this show that put open interest outweighs call open interest among options expiring in three months or less, but it ranks in the 96th percentile of its annual range. In other words, short-term speculators have been more put-heavy toward JNPR just 4% of the time within the last year.
This attention from option bears is understandable when looking at Juniper Networks' technical backdrop. In addition to lagging the broader S&P 500 Index
(INDEXSP:.INX) by nearly 10 percentage points over the past 40 sessions, JNPR has surrendered around 16% since hitting its Feb. 4 high of $22.98. As touched upon, the downward momentum is continuing in today's session, after Goldman Sachs slapped the stock
with a downgrade and price-target cut, citing increased competition from sector peers Cisco Systems, Inc.
(NASDAQ:CSCO) and Alcatel Lucent SA
At last check, JNPR was down around 4% to hover near $19.36.
This article by Karee Venema was originally published on Schaeffer's Investment Research.
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No positions in stocks mentioned.