DTPI – Diamond Management & Technology Consultants, Inc. – Shares of the management and technology consulting firm surged 30.8% at the start of the trading session to an intraday- and new 52-week high of $12.48 on news the computer-consulting company signed a merger agreement to have accounting-services giant, PricewaterhouseCoopers, buy all outstanding Diamond Management shares for $12.50 each. Investors exchanged more than 7,600 option contracts on the stock by 12:15 pm ET, which is volume greater than overall previously existing open interest on the stock of 6,140 contracts. Options traders focused their attention almost exclusively on the call side, buying nearly 800 lots at the October $12.5 strike for an average premium of $0.06 each. Trading traffic was heaviest at the October $10 strike where some 3,000 now deep in-the-money calls changed hands for an average premium of $2.47 a-pop. It looks like roughly 1,400 of those contracts were purchased. In-the-money call buyers make money if Diamond’s shares exceed the average breakeven price of $12.47 by December expiration. The stock’s overall reading of options implied volatility collapsed on the merger news, falling 87.1% to 7.45% by 12:20 pm ET.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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