Mead Options Players Look for Paper Gains

Brian Louis

Buyers have been out en masse recently for Mead (MEA Quote) call options, as some investors have laid down wagers that better times are ahead for the paper stock.

Volatility Index
Close Today	% Change
19.86	+1.22
Source: ILX

Market participants said that people were showing keen interest in the October 30 out-of-the-money calls Tuesday.

Put/Call Ratio
Close Today	Previous Close
0.45	0.47
Source: ILX

Paul Foster of 1010WallStreet.com in Chicago pointed to the aggressive buying in the October 30 calls, where 1,352 contracts traded. The call-buying took place on a day when Mead's stock took a bit of a hit, falling 13/16 to 26 1/8. A person buying the October call options is basically betting on a sizable upside move in Mead's stock.

A call is the type of option that gives the purchaser the right, but not the obligation, to buy a security for a specified price at a certain time, and is basically a bet that the stock will go up. The October options expire on Oct. 20.

Mead's stock was slumping again Wednesday, off 1/8 to 26. Shares of Mead have had a rather difficult year, to say the least. As of Tuesday's close, Mead is down nearly 40% year-to-date, and is trading just above its 52-week intraday low of 24 3/8. The hard times Mead's stock has suffered this year have been a little rougher than what has befallen the sector as a whole.

The Philadelphia Stock Exchange Forest & Paper Products Index is down 25% year-to-date, as of Tuesday's close.

Foster also said that there were some buyers on Tuesday in the September 30 calls also. September options expire Sept. 15.

The Skupp-Seidman options team at Miller Tabak, in their daily note to clients, also pointed out that call-buying continued in Mead.

On Wednesday, there was little notable trading in Mead's October or September 30 calls.

The forest and paper products industry has been in a consolidation period for some time, with a few sizable deals taking place this year.

Foster noted that Finland's UPM-Kymmene (UPM Quote) is still looking for an asset to buy in the U.S., after it was outbid by industry leader International Paper (IP Quote) in a battle for Champion.

In July, Georgia-Pacific (GP Quote) announced its takeover of Fort James (FJ Quote). In February, Finnish-Swedish concern Stora Enso announced its acquisition of Consolidated Papers (CDP Quote).

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It looks like the feverish speculation that online broker Ameritrade (AMTD Quote) will get taken out is cooling a bit.

Action in Ameritrade's options has picked up lately amid a flurry of takeover talk on the online broker. TheStreet.com recently took a look at the speculation and suggested investors might want to temper their takeover betting enthusiasm.

Options volume in Ameritrade has picked up the last few sessions as its stock has rallied sharply on takeover chatter. On Wednesday, however, Ameritrade was giving back some of its gains and was off 1/4 to 16 13/16.

Volume in Ameritrade options was heavier than usual Monday, with 4,125 contracts trading, 3,761 of which were calls, compared to average daily volume of 1,623, according to McMillan Analysis. Volume in Ameritrade options also was decent Tuesday.

The September 17 1/2 calls saw heavy volume, with nearly 1,200 contracts changing hands on the Chicago Board Options Exchange. Last trade Tuesday on the calls went off up 9/16 ($56.25) to 1 3/8 ($137.50) on the CBOE.

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