IB Options Brief: Meritor, Inc. (MTOR)

Posted April 16th, 2012 by Caitlin Duffy in Unusual Activity

Call Buyers Drive Traffic In Meritor Options

MTOR - Meritor, Inc.
Of the 18,255 open options positions on the supplier of parts for manufacturers of trucks, trailers and specialty vehicles, most are open call positions, with the stockís call-to-put open interest ratio currently at 2.042. Call options on Meritor are active today, as well, with more than 50 calls changing hands on the stock for each single put option in play.

The action in MTOR options this morning suggests one or more investors is preparing for shares in the Troy, Michigan-based Company to rally ahead of expiration next month. One catalyst for the bullish look may be Meritorís upcoming second-quarter earnings report set for release ahead of the opening bell on May 2nd. The stock today trades 1.3% lower on the session at $6.88 as of 12:30 p.m. ET. Call open interest patterns indicate an influx of buyers starting in mid-March, with the trend continuing this morning.

The biggest play in MTOR options today is the purchase of 1,000 calls at the May $8.0 strike at a premium of $0.20 apiece. Profits may be available on the contracts should shares in Meritor jump 19.2% to top $8.20 by May expiration. Much of the call open interest at surrounding strike prices in the May expiry appear to have been generated by buyers taking positions back on March 21st, when MTORís shares jumped 13.0% intraday to $8.46 after the Company reaffirmed its outlook for 2012 revenue and earnings forecasts.

In the three weeks since, the stock has reversed gains, and then some. Needless to say, buyers of the contracts at the end of March paid far more than traders today, as evidenced by the 75.0% decline in May $8.0 strike call option premium from $0.81 apiece on March 21st to todayís asking price of $0.20 each.

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