American International Group Inc, Cabelas Inc Surge On Fresh Investments

Carl Icahn took a fresh stake in American International Group Inc (NYSE:AIG), while Elliott Management bought in to Cabelas Inc (NYSE:CAB)

Oct 28, 2015 at 11:36 AM
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Insurance giant American International Group Inc (NYSE:AIG) is moving higher today, on news activist investor Carl Icahn has taken a "large stake" in the company. Icahn wrote a letter to AIG CEO Peter Hancock in which he urged him to split the firm into three separate companies, suggesting it's currently "too big to succeed." The stock is now 3% higher at $62.77. 

Option traders are responding in a big way, with calls crossing at four times the expected mid-morning pace. However, call players were already extremely active in AIG's options arena coming into today. According to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio stands at a brow-raising 10.68 -- topping all comparable readings from the past year. In short, call buying has never been more popular in the past year. Suffice it to say, this was excellent timing. 

We'll see if this news leads to a shift in sentiment from analysts. Currently, 58% of covering brokerage firms say American International Group Inc is only a "hold." This tepid outlook comes despite the stock's 12.1% year-to-date climb. 

Elsewhere, retailer Cabelas Inc (NYSE:CAB) is booming on a fresh investment of its own. The shares have shot 18.9% higher to $39.75, after Elliott Management Corporation revealed a roughly 11% stake (subscription required) in the company, and announced plans to speak with the firm's management about strategic options, including a sale. 

This has unsurprisingly led call players to the stock's doorstep. The contracts are crossing at 12 times the average pace. It looks like traders are buying to open the November 40 call, betting on extended gains from CAB before the contracts expire at the close on Friday, Nov. 20. The shares topped out at exactly $40 earlier. 

Unlike AIG, CAB's speculators were rather bearish coming into today. The stock's ISE, CBOE, PHLX 10-day put/call volume ratio comes in at 1.90, higher than three-fourths of all readings from the past 12 months. This pessimism is seen outside the option pits, too, where short interest represents almost one-fifth of the equity's float. At these levels, it would take bears almost seven sessions to repurchase their bets, at average daily volumes. 

Today's price action is a breath of fresh air for Cabelas Inc shareholders. The stock had given back 36.6% of its value in 2015 coming into today, hitting a three-year low of $33.03 just yesterday. 


 

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