Market Insights

Datadog, an 11-year old cloud-computing firm, broke out to new highs last month. Today, options traders looked for the rally to continue.

More than 20,000 call options changed hands at the 140 strike, plus another 5,000 at the 142 strike. Four contracts accounted for most of the activity:

• Investors bought more than 5,000 October 140 calls, with the large blocks pricing for $6.70 to $7.85.
• About 5,500 10-September 140 calls were purchased, mostly for $1.40 to $1.83.
• The 1-October 142 calls traded about 2,000 contracts. Buyers paid $3.90 to $5.
• The 10-September 142s were bought about 1,500 times for $0.25 to $1.40.

Calls fix the price where investors can purchase a stock. They can appreciate rapidly when shares rise but also expire worthless if no rally occurs. In the case of today’s activity, traders seem to be looking for more upside in the New York-based tech firm.

DDOG rose 1.61 percent to $139.57 today and is up more than 50 percent in the last six months. It jumped to new all-time highs on August 5 after earnings, revenue and guidance beat expectations. The strong numbers resulted from a 59 percent increase in large clients (over $100,000 in annual revenue). It also upsold more customers into multiple products.

The company is a member of a new industry niche helping enterprises monitor data across sprawling cloud-based platforms.

Overall option volume in DDOG was almost triple the average over the last month, with calls outnumbering puts by bullish 9-to-1 ratio.