Akamai options analysis after $11.6B Anthropic cloud deal

The options market in Akamai Technologies (AKAM) is reacting significantly to a $11.6 billion, seven-year cloud infrastructure deal with Anthropic, announced after Thursday’s stock market close. Following the news, the stock surged by approximately 17% in after-hours trading, and as of 10:45 AM EDT, it rose by another 7.34% to $118.52. This move has marked a notable shift for Akamai, which was previously considered a value CDN name. The call/put ratio stands at 3.21:1, based on 44,051 total contracts.

Analyzing the options structures, the Oct $125/$150 call spread is the most significant block. This spread involves buying the $125 call and selling the $150 call, which caps the upside but lowers the overall cost. At the current price of $118.52, the $125 strike is only about 5.5% out of the money, meaning it could be reached within days if the upward momentum continues. The $150 strike aligns with revised price targets from Piper Sandler ($158) and UBS ($148).

These options strikes closely match the target ranges proposed by analysts. The spread between the bearish ($135) and bullish ($225) scenarios is quite wide at $90, reflecting a considerable level of uncertainty surrounding the deal. With the market cap of AKAM exceeding $15 billion, this uncertainty indicates genuine differences in how stakeholders anticipate the deal's impact.

There's an interesting piece of data that often goes unnoticed: implied volatility has decreased by 1.08 percentage points to 61.76% over the next three months, even as the stock continues to rise. This is an example of volatility crush, where the risk of the deal being real resolves itself, and hedgers begin selling volatility back into the market.

At the same time, the 90/110 skew has increased by 0.58 percentage points to 2.36 percentage points, indicating a small but growing demand for downside protection. This could be from investors who are long on the stock and wish to hedge potential losses related to the capital expenditure over the next five quarters, projected to be around $4.8 billion by management.

Looking at the bullish case, Akamai could transform into an AI infrastructure play due to the Anthropic deal, as described by Piper Sandler. The $125/$150 call spreads suggest that the market is pricing in a new normal for the stock, with the October expiry reflecting confidence that this positive trend will persist through the earnings season.

Conversely, the bearish outlook is highlighted by UBS, which notes an incremental $5.5 billion in capex over two years against $4.6 billion in cash, indicating that AKAM may need additional financing to support the deal. The open interest on $125 calls is significantly higher (6,933 contracts) compared to $150 calls (169 contracts), suggesting that the market views the $125 strike as achievable in the near term, while the $150 strike is considered more speculative.