PDE – Pride International Inc. – It looks as though one savvy option investor may have had a big result by staying optimistic over prospects for oil services while others were turning their backs on the sector. In mid-December an investor paid $1.20 for 4,000 call options reserving the right to buy shares in Texas-based offshore driller Pride international at a fixed $36 per share before they expired in March. Two months ago the investor might have been accused of wasting $480,000 in the hopes that its share price would rally 15% at a time when sellers had forced the share price in to retreat at $31.21. Yet a deal announced on Monday matches Pride with U.K.-based Ensco that will leave a combined operation in charge of 74 rigs around the globe and send it to number two player by customer count. Today the investor sold all 4,000 call options at $4.40 each as shares in Pride surged straight through the strike price following the announcement of a 21% premium to Friday’s close. Shares touched a high at $40.71 and the closed call option trade leaves this investor better off by $1.28 million.
BEC – Beckman Coulter – The announcement of a board-approved bid from US conglomerate Danaher for diagnostic equipment-maker Beckman Coulter sent option implied volatility in to a tailspin on Monday. Shares in Beckman Coulter surged from a closing price of $75.17 and remain short of the $83.50 per share offer price valuing the company at $6.8 billion. Having effectively put itself up for sale in December implied volatility on the options remained muted at around 35%. The recent jump in the share price to around $75.00 created some discomfort for investors who bid up implied volatility fearing the potential for disappointment. So now a done-deal is in the hopper volatility burst this morning deflating option prices given the future certainty for the company’s prospects. The February$80 strike calls showed 12% implied volatility following news of the deal having fallen in recent days from 45%.
DHR – Danaher Corp. – For its part Danaher expects its reach into the life sciences market to be worth as much as 10 cents to its bottom line this year and perhaps 30 cents in 2012 as annual cost synergies mount to $250 million. Beckman has revenues of $3.7 billion standing at around 15% of the $25 billion per year market and has a profit margin of around 45%. Once investor this morning decided that the move would further carry Danaher’s share price above $50.00 leaving behind a near-three month range between $45.00 and $48.50. The investor sold put options expiring in March at the $48.00 strike to buy calls at the $50.00 strike. Given the jump in Danaher’s share price this morning to as high as $50.29 the calls jumped to $1.30 while the puts slipped to 57 cents to create a net premium of 73 cents. Had the eager investor waited and watched for developments to unfurl a little longer and as initial enthusiasm faded, the same trade could have been placed at just 49 cents. Shares pared a gain to just 3.3% up on the session at $49.54.
BPOP – Popular Inc. – The rising stock market has swept shares in this small-cap southern banker to the highest since May 2010. Shares in Popular today trade 10-cents higher at $3.48 prompting one investor to buy some downside protection. It looks like one investor paid 15 cents for 20,000 lots to protect against slippage in the stock towards $3.00 using put options expiring in July. The trade is curious from the perspective that a similar trade went through on December 12 bumping up open interest by that same amount. At the time shares were trading at $3.00 and the put options commanded 39 cents. Today’s action could be the closing side of a short sale given the subsequent escalation in the share price since that point in time. The rally in its share price has caused a sizeable decline of 12.5% in its implied volatility. Either way you look at it that plays right into the hands of a put player today with the premium slipping by two cents for today’s trade.