Options Brief: TiVo, Inc. (TIVO)

TIVO – TiVo, Inc. – Shares of the provider of technology and services for TiVo® subscription-based digital video recorders shot up as much as 8.25% today to touch an intraday high of $8.26 on speculation DirecTV is considering a buyout. The rally in the price of the underlying stock and takeover chatter inspired bullish options activity on TIVO during the session. One long-term optimist purchased a plain-vanilla debit call spread to position for sharply higher shares by expiration in January 2011. The investor picked up 1,000 calls at the January 2011 $11 strike for a premium of $1.16 each, and sold the same number of calls at the higher January 2011 $17.5 strike for a premium of $0.34 apiece. The net cost of the bullish play amounts to $0.82 per contract. Therefore, the investor responsible for the spread is prepared to profit should shares of the underlying stock surge 43% from the today’s high of $8.26 to surpass the effective breakeven point on the spread at $11.82 by January 2011 expiration. The call spreader stands ready to amass maximum potential profits of $5.68 per contract if TiVo’s shares jump 111.8% to trade above $17.50 by expiration day.