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Option Bulls Stream Toward Pandora Media Inc (P)

In-the-money calls are popular in Pandora Media Inc's options pits

by 3/28/2014 12:18 PM
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Option Brief: Pandora Media Inc (NYSE:P) is 1.5% higher at $30.23 today, after bouncing off of its ascending 32-week moving average. As such, calls are trading at more than two times their average intraday rate, with 14,000 calls on the tape. Furthermore, the stock's 30-day at-the-money implied volatility (IV) is 7% higher at 70.1%, reflecting a growing affinity for short-term contracts.

Most active so far is P's in-the-money May 29 call, where north of 5,000 contracts have crossed the tape. Several mid-sized blocks at the strike traded off the ask price, suggesting they were purchased. In addition, IV is trending higher, and the International Securities Exchange (ISE) confirms significant buy-to-open activity.

Today's call buyers are gambling on Pandora muscling its way higher over the next several weeks. Specifically, they want the shares to make their way north of $32.53 -- the strike price plus the option's volume-weighted average price of $3.53 -- by the closing bell on Friday, May 16. However, if shares of the streaming music service slip south of $29 and the contracts expire out of the money, the traders will forfeit the initial cash outlay.

Technically speaking, Pandora Media Inc (NYSE:P) has been a long-term overachiever, more than doubling on a year-over-year basis. Fundamentally speaking, the company is tentatively scheduled to report first-quarter earnings the week of May 19, just after the aforementioned options expire.


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