IB Options Brief: Brocade Communications Systems Inc. (BRCD) & International Paper (IP)
Put Sellers And Call Buyers Prepare For Dell Bid For Brocade
BRCD ñ Brocade Communications Systems Inc.
Options volume is heavy in switcher-maker Brocade after a broker note predicted that it fits the bill for a bid from Dell. Shares in Brocade reached a 52-week high after the analyst noted that cash-rich Dell filed a debt-shelf earlier in the week of $3.4 billion or just about enough to buy Brocade if it wanted to change course and enter the networking market.
One investor appeared to sell 11,400 put options expiring July at the $6.00 strike presumably on the assumption that its shares remain a hotbed of speculation for the next several weeks. The analystís note put a price tag on the stock of $10.00 underpinning a surge in the stock, which rose to $7.20 at the dayís best.
Call options expiring next month were also well bid with the $8.00 strike proving most popular. Around 25,000 options granting the right to buy were exchanged with a current price of just 20 cents indicating a one-in-four chance of success over the next five weeks.
IP - International Paper
Notable activity in options on the paper-maker indicate one investor giving up on a good idea. Options volume of 20,935 on Thursday was made up of just two trades involving 10,000 lots each in what appears to be the closure of a losing calendar spread.
On May 19 when shares in International Paper were trading one dollar higher than today at $31.67 an investor bought the same amount of call options expiring in July to buy calls expiring in January. The trade involved the $32 strike price in July and the $36 strike in January with the investor hoping for a steady climb in IPís shares in the meantime.
At the time the trade cost the investor 79 cents to employ. However, since that time the trade has suffered with shares wilting to $30.65 causing a narrowing of the calendar spread to 56 cents and imposing losses on the weary trader. It appears as though this time around the investor is giving up on this trade.
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