VHC Call Volume Hits Annual High After Apple Ruling

Front-month strikes are popular

The shares of VirnetX Holding Corporation (NYSEAMERICAN:VHC) are up 39.5% at $5.40 -- earlier hitting a 15-month peak of $5.57 -- after a U.S. appeals court upheld a 2016 ruling that required Apple (AAPL) to pay the security technology firm $302 million in a patent infringement case. That amount has now grown to $440 million due to interest and increased damages, among other costs.

Not only has VHC stock volume spiked, but options volume is running at an accelerated clip, too. At last check, 9,188 calls and 1,254 puts have changed hands -- 13 times what's typically seen, and both call and total options volume at a new annual peak. The January 2019 4- and 5-strike calls are most active, where it looks like some buy-to-open activity is occurring.

More broadly speaking, VHC options traders have been buying to open puts relative to calls at a quicker-than-usual clip. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.60 ranks in the 84th annual percentile.

This skepticism toward the stock is seen elsewhere, with 8.34 million VirnetX shares sold short. This represents 14.3% of the equity's available float or 19.4 times the average daily pace of trading. As such, some of today's upside could be the result of shorts covering.

Looking at the charts, today's bull gap has VirnetX stock breaking out above $5, which has marked a top over the last 12 months. Following its most recent test of this region back in September, the shares quickly reversed course start the new year trading in seven-month low territory near $2.34, but the security is now boasting a 124.6% year-to-date lead.