MTB – M&T Bank Corporation – Speculation surrounding ‘talks’ between MTB and Spain’s Santander to merge Santander’s U.S. operations with M&T Bank Corp. inspired frenzied call activity on the Buffalo, New York-based bank holding company and drove its shares up as much as 9.85% to an intraday high of $90.00. Bulls are positioning for continued appreciation in MTB’s shares in case there turns out to be truth to the unconfirmed rumors flying around town. Investors purchased at least 4,000 calls at the June $90 strike for an average premium of $0.61 per contract. Call buyers at this strike price make money only if shares of the underlying stock trade above $90.61 ahead of expiration tomorrow. More than 7,700 calls changed hands at the June $90 strike versus previously existing open interest of just 615 contracts. Call buying also took place at the July $90 strike where some 1,100 calls were picked up for an average premium of $3.25 per contract. Just 24 hours ago, the same July $90 strike call options cost a maximum of $0.75 per contract. Finally, other bullish players purchased approximately 1,900 calls at the higher July $95 strike for an average premium of $1.43 per contract. Investors long these higher-strike calls profit only if shares of MTB rally 7.14% over today’s intraday high of $90.00 to surpass the average breakeven point on the calls at $96.43 by expiration day next month. The demand for call options on MTB coupled with rampant speculation lifted MTB’s overall reading of options implied volatility 12% to 42.31% by 11:47 am (ET).
Affiliation: Interactive Brokers
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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