By Jud Pyle, CFA, chief investment strategist for the Options News Network
did not announce significant news today, but at least one investor is taking a bullish stance on the Internet infrastructure name and boosting call volume.
The slightly out-of-the-money Dec. 25 calls changed hands more than 25,000 times today and are home to open interest of 1,599 contracts. These calls closed up 12 cents on the day. This computes to an implied volatility of 39. The volume-weighted average price (VWAP) of these calls is approximately 90 cents, meaning bullish investors who bought the Dec. 25 calls need VRSN shares to expire higher than $25.90 to make money, unless, of course, the calls rise prior to expiration following a rise in the shares and the investor chooses to sell them to take profits.
At approximately 12:28 p.m. EST, VRSN shares were trading up 14 cents to $22.59. The Dec. 25 calls have a delta of 33 cents, meaning for every dollar move in the underlying, these options should climb 33 cents. That means these calls should have moved 5 cents, but call-buying activity is pushing the prices higher.
Normal daily option volume in VRSN is approximately 4,600 contracts, and the call-buying action we've seen already far trumps this figure. So far, more than 27,000 contracts across all strikes have hit the tape today, the bulk of which changed hands in the Dec. 25 call series.
Call buying like this does not automatically mean investors should stock up on VRSN shares. The company's stock, which closed at $22.64 (up 19 cents on the day) is currently up 26% higher from a recent low of $17.92, however, and at least one investor is looking for further upside throughout the next couple months.
Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."