Takeover Rumor Spurs Hologic: Options
By Jud Pyle, CFA, chief investment strategist for the Options News Network
CHICAGO (
) -- Although
Hologic
(HOLX) - Get Report
did not announce any significant news Monday, at least one investor is taking a bullish stance on the diagnostic equipment maker and boosting call volume.
This type of call activity looks similar to other option activity we have seen in the past few weeks in the health care sector, as some investors speculate on potential merger-and-acquisition activity.
The slightly out-of-the-money September 17.50 calls changed hands more than 11,900 times today and are home to current open interest of 4,021 contracts. These calls are up 28 cents on the day. HOLX shares closed the day up 39 cents to $17.46.
The September 17.50 calls have a delta of less than 50, meaning for every dollar move in the underlying, these options should move by less than 50 cents. That means these calls should have moved around 20 cents, but call buying activity pushed their prices even higher.
Elsewhere in HOLX, more than 9,300 of the October 20 calls changed hands versus open interest of just 20 contracts. These calls finished the day up 25 cents to 33 cents. This was also a move that was greater than would be expected considering the delta of the calls.
Normal daily option volume in HOLX is approximately 3,000 contracts, but today's activity managed to far eclipse that figure. On the day, more than 28,000 contracts across all strikes hit the tape today.
One possible reason for the call buying was a rumor circulating that HOLX could be the target of an acquisition. The fact that September expiration is coming this Friday of course means that the September 17.5 calls do not have much time left to be profitable. The buyer needs the stock to get a move on soon in order to make money.
At the time of publication, Pyle did not own any stock mentioned. Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."
