RDWR – Radware Ltd. – Speculation that Radware is in talks to be sold to either Hewlett-Packard or IBM sent shares of the Application Delivery solutions provider flying this afternoon. Shares of the Tel Aviv-based company surged as much as 41.6% to $39.46, the highest recorded price in well over 5 years time, due to rumors RDWR could be purchased for approximately $945 million, or $45 per share. Not surprisingly, options traders reacted by initiating bullish stances on the stock. Traders purchased at least 3,200 in-the-money calls at the September $35 strike, the highest strike price currently available on RDWR, for an average premium of $3.30 each. Investors long the calls make money if Radware’s shares exceed the average breakeven price of $38.30 through September expiration day. Other bulls sold roughly 1,600 puts at the September $30 strike to pocket premium of $0.45 per contract. Put sellers keep the full premium received on the sale as long as Radware’s shares exceed $30.00 through expiration on Friday. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $29.55 each in the event the puts land in-the-money at expiration.
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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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