Options Play on Teva-Barr, AutoNation, and Carnival
Options traffic is swirling about possible generic drug merger, auto-related stocks, and a cruise line, Rebecca Darst of Interactive Brokers reported on CNBC's "Squawk Box" Thursday.
Options were active just before reports drifted out of Israel media that there may be a possible $7.5 billion merger between generic drug giants Barr Pharmaceutical , based in New Jersey, and Israel-based Teva Pharmaceutical. (See her full comments in the video).
"By (Wednesday's) end, we were showing option trading in Barr at 12 times the normal level. Call volume in Barr Pharmaceuticals was at its highest level in about 52 weeks. Last time that Barr Pharmaceuticals calls traded on this kind of volume was on July 23 2007, when there were also unsubstantiated takeover rumors making the rounds. So we shall see what becomes of this report with Teva." (Check Teva options and Barr options).
Auto related stocks are getting options attention following drops in oil prices, Darst said.
"A lot of these auto-related stocks have been thrown a rope these last couple of days, what with the pullback in oil prices. I thought it was interesting to take a look at these auto-related stocks to see if option traders might have been making like Wilbur Ross, and stepping into things that have been hurt by fuel. We didn't see a lot of contrarian positioning in that regard, and AutoNation Tuesday, after the initial pullback in oil prices, we saw someone take out a huge 31,000-lot position in October 5 strike puts. This was the highest level of put volume in at least 52 weeks for AutoNation , and if you take the premiums into consideration, that's looking for 40 percent more downside in October. Not really sure what the news catalyst would be, but that's a very large position to be taking in AutoNation. (Check AutoNation's options chain here).
Cruise line operator Carnival is seeing similar, but different, kinds of option attention, she said.
"There was some contrarian action on Carnival , where option traders seemed to be looking for some upside, or at least a return to May levels, by the end of the year. Shares were up 10 percent yesterday, to 33.21; we saw in addition to buying in August 32.50 calls a long 6,000 call spread position go through in the January contract between strikes 32.50 and 40. If you take the net debit of two dollars into consideration, you're going to look for 7 percent upside on that trade today even." (Check Carnival's option chain here).