Mattel Stock Dips Amid Merger Reports

Mattel options appear attractively priced though

Managing Editor
May 18, 2018 at 10:07 AM
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Mattel, Inc. (NASDAQ:MAT) stock is down 0.7% to trade at $15.17 this morning, after the Wall Street Journal reported that MGA Entertainment (subscription required) offered to merge with the toy company. While Mattel rejected the proposal, Isaac Larian, CEO of MGA, plans to make an offer directly to MAT shareholders, according to the WSJ report.

Mattel stock has shed 31% year-over-year, and hit a nine-year low of $12.21 on April 20. Since then, however, the equity has fought back, adding nearly 29%. Despite the uptrend in the last month, the shares were again turned away at their overhead 200-day moving average in recent days, a trendline that has proven to be stiff resistance so far this year.

In the options pits, MAT call buying has been prevalent in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security's 10-day call/put volume ratio at 3.78, ranking in the elevated 77th percentile of its annual range. This suggests that calls have been bought over puts at a faster-than-usual clip during the past 10 days. 

Of course, some of those call buyers -- particularly those scooping up out-of-the-money options -- could be short sellers seeking an options hedge. Short interest represents more than 18% of MAT's total available float.

Nevertheless, those purchasing premium on Mattel are in luck. The stock's Schaeffer's Volatility Index (SVI) of 41% ranks in just the 19th annual percentile, suggesting short-term options have rarely been cheaper, from a volatility standpoint.

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