Far From Over...11,492 March $20 Calls Bought Today...
Other than Fio's Lumpy Guidance, Their Margins are awesome, they beat Revs & EPS. There may be more behind those March Call purchases than meets the eye. More than 2 Million invested in March Call options today leads me to look at this from a different vantage point. Think about it,
they really have no competitors with their Software Driven Flash Data Solutions. So here is the play as I see it:
The market has been gift wrapped an opportunity to take a run at buying out Fio in my opinion.
With all they have going on, it is my opinion that a takeover in 3-6 months will probably be at much higher prices as Fio continues to grow. With this current hiccup, my guess is that someone takes a run at Fio in the $35-$40 range by the end of February. This is a short term opportunity for a large player to get into the Flash Software Driven Cloud Data Center Space. This is just my opinion, but this makes sense to me. Data will only keep growing, & the fact that some of Fio's customers are
able to slow next quarter purchases is a testament to how excellent their product really is.
My Prediction: Back in the 20's by next week. It is becoming more evident how awesome their solutions really are. $3.5-4 billion is a great deal for a company wanting to enter this space. This is far from over for the shorts who do not cover first thing tomorrow morning.
Those calls are definitely NOT held by people who think this is going up. Quite the contrary,
They are hedges by shorts..who are getting rich now
Fio is dead money until at the very least the summer july August. After not pre announcing this horrible guidance and blindsiding investors no one will trust this mgmt team for a long time.
The stock price will hover btw 13 and 17 for most of 2013. And that's assuming no more bad news
You don't pay a premium to hedge your short by buying a March Call.
You hedge your short with the front month Call which is February at a much cheaper price.
In my opinion the March Calls are sign that something significant will happen in the next 6 weeks. I think Fio gets bought out in my humble opinion.
You could be right, but that is a very expensive insurance policy on a short. The bulk of those (about two million dollars worth) were bought at $215 per contract ($2.15 a share) and were just in the money. It would be backing a 1 million share short position. The only way for that fund or investor to make money on that would be if the shares dropped to $17.85 or less just to break even. Now of course it did, but if they were that confident that they shorted a million shares and they were so confident that it would drop more than enough to cover the premium on the call, then why buy the call? They took a $3.5 million profit and turned it into a $1.5 million profit assuming they get out of the short now. If that stock had done nothing or risen they would have lost $2 million. If it fell but fell less than $2.00 they would lose money. So you could say they clearly knew what was going to happen as they made money, but if they knew what was going to happen they would not have needed the insurance. I do find it odd that anyone insuring a short against a surprise pop would pay the expensive premium for an in the money call a month out. Why not pay a far lower premium for out of the money calls for February? If they bought $22'50's it would have saved a ton and effectively insured against the same pop that being anything over $22.