TiVo Inc., Pandora Media Inc Pop on M&A Buzz

TiVo Inc. (NASDAQ:TIVO) and Pandora Media Inc (NYSE:P) are both trading higher on M&A buzz

by Josh Selway

Published on Mar 24, 2016 at 10:50 AM
Updated on Mar 24, 2016 at 10:52 AM

Today's trading is supposed to be rather dull from a historical volatility standpoint, but a fresh wave of M&A developments has brought some excitement to Wall Street this morning. Two stocks trading higher on M&A news are DVR manufacturer TiVo Inc. (NASDAQ:TIVO) and streaming radio provider Pandora Media Inc (NYSE:P). Let's take a closer look at TIVO and P, which are both attracting attention from option bulls.

TIVO has gained 20.6% this morning at $9.24, putting the stock back into the green in 2016 and on pace for its best close since late November. Driving the shares higher are reports the company is in merger talks with digital entertainment firm Rovi Corporation (NASDAQ:ROVI). However, it appears TIVO may be having trouble with its descending 50-week moving average, located at $9.28. It hasn't conquered this trendline on a closing basis since November 2014. 

This upward price action has to be putting pressure on short sellers. By the numbers, it'd take almost seven sessions for short sellers to buy back the roughly 5.4 million TIVO shares sold short, at average daily trading levels. 

Elsewhere, option traders are expressing confidence in TiVo Inc. (NASDAQ:TIVO) today. Though volume remains light on an absolute basis, the stock's calls are trading at four times the intraday average. Moreover, traders are buying to open the April 10 call, expecting TIVO to rally above the round-number level before front-month options expire at the close on Friday, April 15. 

As for P, the shares are up 9% at $10.77, as unsubstantiated rumors are again swirling that the company is interested in selling itself. The stock is still down roughly 20% year-to-date, though, and again topped out just below its 80-day moving average -- the same level that blocked the shares' rally attempt early this month and also marked their post-bull-gap highs back in December. 

Plus, if this M&A-related rally is as short-lived as the one in February and P continues to lag on the charts, a reversal in bullish behavior by option traders could weigh on the shares. That's because Pandora's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 6.20 -- higher than three-fourths of similar readings from the past year.

It's no different today, as calls are crossing at 14 times the expected intraday pace. According to Trade-Alert, option traders are buying to open the weekly 4/1 10.50-strike and April 12 calls.

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