Call Players Targeted Walgreens Boots Alliance (WBA) Ahead of Rite Aid (RAD) Reports

Reports indicate Walgreens Boots Alliance Inc (NASDAQ:WBA) is close to buying sector peer Rite Aid Corporation (NYSE:RAD)

by Josh Selway

Published on Oct 27, 2015 at 1:40 PM
Updated on Jun 24, 2020 at 10:16 AM

According to The Wall Street Journal, Walgreens Boots Alliance Inc (NASDAQ:WBA) is reportedly nearing a deal to buy fellow pharmacy chain Rite Aid Corporation (NYSE:RAD). Since the report surfaced, WBA has added 4.6% to trade at $93.56, while RAD is 36.9% higher at $8.32. Taking a closer look at these names, one group of traders is likely celebrating the news. 

Specifically, WBA's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at an extremely elevated 20.74 -- meaning almost 21 calls have been purchased for each put during the past 10 days. This reading is only 1 percentage point from an annual high. In other words, there's been an outsized interest in WBA calls during the past two weeks. 

It appears most of the activity took place at the November 90 call, which added over 36,000 contracts during the past two weeks alone. Trade-Alert data reveals that most of these November 90 calls were bought to open, with a block of 20,000 contracts initiated just last Friday. Furthermore, calls are again popular today, with the 19,000 contracts exchanged representing about three times the daily average.

As for RAD, it appears some bears got out of the way just in the nick of time. That is, short interest declined by nearly 15% during the most recent reporting period.

Elsewhere, RAD has WBA beat when it comes to option activity. So far today, more than 157,000 RAD calls have crossed, compared to an intraday average of fewer than 8,000. 

Coming into today, the two pharmacy stocks had been heading in opposite directions. Walgreens Boots Alliance Inc (NASDAQ:WBA), for instance, was 17.4% higher in 2015, while Rite Aid Corporation (NYSE:RAD) came in 19.1% below breakeven. 

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