Fortinet sees nervous earnings trading

By David Russell,

Shutterstock photo

Fortinet reports earnings this afternoon, and investors are nervous.

optionMONSTER's Depth Charge tracking system detected the purchase of about 1,000 May 26 puts for $1.80. Roughly the same number of May 23 puts were sold at the same time for $0.61. Volume was above open interest in both strikes.

The trade cost about $1.19 and will earn a profit of approximately 150 percent if the network-security stock is at or below $23 on expiration. The strategy is known as a bearish put spread because it leverages a move between two specific prices. (See our Education section)

FTNT is down 1.74 percent to $25.96 in midday trading. It rallied about 40 percent in the first quarter but then stalled around $28 and has been drifting lower since.

The company has beaten expectations for at least three straight quarters. This session's activity is probably the work of investors wanting to hedge before today's report.

Some 1,800 May 25 puts were also bought for $1.35 to $1.45. The trade occurred at about the same time the put spread crossed Depth Charge.

Overall option volume is 5 times greater than average so far today, with puts outnumbering calls by almost 2 to 1.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: FTNT

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