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Sirius XM Holdings Inc. (SIRI) Overwhelmed by Option Bulls

Two huge block trades fuel a surge in Sirius XM Holdings Inc. options activity

by 3/14/2014 11:10 AM
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Sirius XM Holdings Inc. (NASDAQ:SIRI) is up 1.2% this morning to trade at $3.41, after Liberty Media Corp (NASDAQ:LMCA) announced last night that it no longer plans to buy the remaining 47% stake of the satellite radio firm that it doesn't already control. This news has also been met with excitement in the options pits -- particularly on the call side, where volume is running at a 50-fold mark-up to its average intraday pace.

What's largely fueling the uptick in options activity is a pair of block trades at SIRI's January 2015 4-strike call, each of which exceeded 46,000 contracts. Overall, more than 100,000 contracts have changed hands at the strike -- 99% at the ask price, suggesting they were bought. Also, with volume exceeding open interest, and implied volatility at the LEAPS strike soaring, it's safe to assume to bullish bets are being placed. Between the two block trades, more than $2.17 million changed hands (the number of contracts, times the premium paid, times 100 shares represented by each option contract).

Essentially, these optimistic speculators are hoping Sirius will muscle over 17% higher in the coming months in order to reach in-the-money (ITM) territory by January 2015 options expiration. Right now, delta for the call is 0.40, representing a 2-in-5 chance of an ITM finish. No matter what happens, the LEAPS buyers have at stake no more than the initial premium paid.

Today's penchant for long calls over puts is business as usual for Sirius XM Holdings Inc. (NASDAQ:SIRI) traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 10-day call/put volume ratio of 12.26, as more than a dozen calls have been bought to open for every put during the last two weeks.


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