Stocks quoted in this article:
Navistar International (NAV – 36-5/16) has shot up over 20 percent so far today on rumors that PACCAR (PCAR – 38-1/16) has made a bid to acquire the company. PCAR has denied the rumors, and NAV has declined comment. NAV had been in a near-term decline, retreating approximately 23 percent from early September to Friday's close.
Despite the equity's recent weakness, Schaeffer's put/call open interest ratio (SOIR) on NAV is trending near an annual low of 0.19. Option activity on NAV has heated up today in reaction to this rumor. On the call side, over 2,000 contracts have traded on the October 35 call, which could represent profit taking on the 2,934 contracts open at this strike. The October 35 put has seen over 800 contracts cross the tape. Since this option has open interest of just 471 contracts, at least some of this activity should result in new positions.