TradeTalks Unusual Options Activity: VIAV

Each week in #TradeTalks, we examine data provided by Henry Schwartz and the team at Trade Alert for unusual options activity on the six Nasdaq options exchanges on Nasdaq-listed stocks for clues into how “paper” is looking at the underlying security. Paper is a term that refers to orders from hedge funds, banks and other major institutions.

Trade Alert picked up on unusual options activity in Viavi Solutions (VIAV), a company that provides network testing, monitoring, and assurance solutions to communications service providers and enterprises and their ecosystems worldwide. For the period of June 27th – July 3rd, Trade Alert detected bullish flow on June 29th Sep 10 calls as the most actives series, followed by Dec 10, Sep 11 and Dec 11 calls as the next most active. Total volume was nearly 7X the daily average and lopsided 40:1 at 10,000 calls and 250 puts. The stock saw notable strength earlier in June after peer Nasdaq-listed Finisar (FNSR) rallied on earnings. VIAV is expected to report early August.

Jun Zhang with Rosenblatt Securities believes there is still upside to the stock price based on its lead in filters.

We are positive on VIAV as we believe the business is not heavily exposed to the volatility of the optical market and remains a 3D sensing market leader, which we believe has not been fully reflected in the stock price. Our industry research also suggests that: (1) many Chinese 3D sensing module suppliers have all chosen VIAV as their sole optical filter supplier, and (2) Apple has booked capacity of 150 million optical filter units from Viavi in 2018.

Patrick Newton at Stifel agrees, and raised his price target to $11.00 from $9.50.

The company's proprietary low-angle shift filter technology has enabled the company to develop an industry leading position in the initial adoption of 3DS (3D Sensing) technology, with checks indicating IP and patents should result in a market-leading position for the foreseeable future.

3D sensors collect and transmit data for processing to give phones a sense of depth, much like the human eyes. Other potential beneficiaries from 3D sensing smartphones include Lumentum (LITE) and Himax (HIMX).

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