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Breaking Down the Hectic Dropbox Options Activity

Patrick Martin

One of the better stocks on Wall Street today is Dropbox Inc (NASDAQ:DBX), up 9.1% to trade at $18.56, although the catalyst is unknown. In response to the breakout, there's noteworthy options activity going on worthy of examination.

At last check, already over 32,000 calls have changed hands, a whopping 58 times the expected intraday amount and 29 times the number of puts traded. Leading the charge is the January 2020 18-strike call, where new positions are being opened. There's also new positions being opened at the January 2020 19-strike call, and December 18 call.

This preference for calls is nothing new. According to data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has a 10-day call/put volume ratio of 5.38. However, short interest increased by 35.4% in the two most recent reporting periods and accounts for almost 6% of DBX's total available float. Thus, its possible some of these calls could be shorts seeking an options hedge against any additional upside.

Whatever the motive, short-term options premiums on Dropbox look relatively cheap at the moment, based on the equity's Schaeffer’s Volatility Index (SVI) of 30%, which ranks in the bottom percentile of its annual range. 

Today's rally is well-timed, considering DBX fell to annual lows of $16.08 on Friday. And despite today's price action -- on track for its best single-day session since Aug. 9 -- the shares' 40-day moving average still looms as a ceiling. 

Daily Stock Chart DBX