How to Play Akamai

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Oct. 16 (Bloomberg) -- MKM Holdings Derivatives Strategist Jim Strugger discusses his options play for Akamai on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Speaker john boehner will probably accept a deal.

All 10 indices are higher this morning.

It's now time for our options insight.

We are in the thick of earnings season, which means there's a d of events to trade off of.

My guest is looking at akamai technologies.

You are bullish heading into this earnings report.

We are expecting a classic beat and raise quarter.

We want to position directly along the report.

This stock is traditionally pretty volatile.

The last eight quarters, the move has been beyond 10%. just over 13%, in fact.

It's a little less than 10%. the stock has been higher twice and when it has been lower, it's been 15%. it does move in both directions.

Tell us about your strategy.

We want to look out to november and by 52.5 strike call and sell a 57.5 strike call.

That creates a call spread.

Skew is pretty steep in the name so implied volatility is bid up relative to calls.

One way to take advantage of that is to sell and out of the money put.

We want to do that via a 46 strike put in november and you can do that trade for around $.70. why don't you want to go farther out than november?

We want to capture the earnings of that.

We think this is a secular growth story as it rate consumption the the internet, video and photographs increases.

Akamai is at the heart of all of that.

It's a long-term story, but this trade is to capture earnings and a few weeks post earnings.

You refer to the business they are -- a lot of cloud infrastructure and its fortunes are tied to apple as well.

That add some clarity to the earnings call.

Ios 7 was released, that helped drive business for akamai in the quarter and they pushed out and upgrade to itunes to support itunes radio.

Direct revenue impact for akamai with those releases from apple and that adds support to his feeling that the quarter will be beat and raise.

We were talking that this is a moderately bullish call.

There are some aggressive hedges against akamai.

That shows up in the skew.

The put skew means hedgers have come in and bid up implied volatility or there are outright shorts there.

We are playing for about an eight percent gain over the next month or so, not being overly greedy.

This text has been automatically generated. It may not be 100% accurate.


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