FireEye calls fly on after-burners

Option traders scored big as FireEye got a double dose of good news this week, first posting strong quarterly results and then getting a boost from bullish trading in a key competitor.

Back on March 20, Investitute’s market scanners detected the purchase of 5,000 June $12 calls for $1.10 with shares at $11.62. Volume was well above the strike’s open interest of 3,438 contracts, indicating that this was fresh buying.

This afternoon those calls sold for $3.39, more than tripling in value. The stock has risen 32.6 percent in the same period, a large gain but one that still pales in comparison to that of the options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

FEYE was up 0.26 percent today to finish the session at $15.41. The cyber-security firm gapped up from the $12 level on Tuesday after beating quarterly estimates and announcing higher-than-expected guidance. It rose again later this week when rival Palo Alto Networks exceeded projections on its top and bottom lines.