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Ebix Call Volume Climbs After Acquisition Announcement

Options players -- and possibly shorts -- go after EBIX calls

by 11/16/2011 1:26 PM
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Software concern Ebix (EBIX - 17.62) has seen an uptick in call volume today, on the heels of announcing its acquisition of HealthConnect Systems. Close to 2,500 calls have crossed the tape so far, representing nine times the equity's expected intraday call volume. Nearly 2,000 of these bullish options were traded at the out-of-the-money December 20 strike -- the majority of them at the ask price, suggesting they were purchased. This call currently carries open interest of just 532 contracts, making it safe to say that a large number of new positions are being initiated in today's session.

What's more, the Schaeffer's put/call open interest ratio (SOIR) for EBIX checks in at 0.79, indicating that calls outnumber puts among options slated to expire within three months. This ratio ranks in the 16th percentile of its annual range, meaning that short-term options players have been more bullishly oriented toward the stock just 16% of the time over the past year.

Echoing this optimistic sentiment toward EBIX is its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio, which stands at 0.86 and ranks in the 55th annual percentile. This confirms that traders have been scooping up bullish options over bearish at a slightly faster-than-usual pace.

Meanwhile, short interest on EBIX edged down by 0.8% during the most recent reporting period. However, these bearish plays still make up a hefty 33.53% of the equity's float, suggesting that shorts looking to cover their bets could be responsible for some of the recent call volume. Either way, it would take almost 37 days to cover these shorted shares, at the stock's average daily trading volume.

Technically, EBIX has lost more than 25% of its value year-to-date, but has outperformed the broader S&P 500 Index (SPX) by roughly 7% during the past 20 sessions. The equity is attempting to notch a second straight weekly close above its 20-week moving average -- a feat not accomplished since March.

In the afternoon hours of the session, EBIX is up around 4.5% and is trading at $17.62.


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