Call Traders Blast Delphi Technologies After BorgWarner Buyout

BorgWarner bought out Delphi Technologies for $3.3 billion

Managing Editor
Jan 28, 2020 at 10:08 AM
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At the top of the New York Stock Exchange this morning is Delphi Technologies PLC (NYSE:DLPH), up a whopping 63.3% to trade at $16, on track for its best day ever by a wide margin. This comes after the U.K.-based auto parts manufacturer was bought out by rival U.S. auto parts maker BorgWarner (BWA) in an all-stock deal valued at $3.3 billion in enterprise value, according to Reuters. 

The timing couldn't have been better for Delphi Technologies stock, after falling to record low of $9.51 on Jan. 24 and taking a 55.7% haircut in the last nine months, going into today. Now though, the shares are trading at their highest point since September and have reclaimed their 200-day moving average for the first time since July. Interestingly, this all comes with DLPH moving firmly into oversold territory earlier last week, with a 14-day Relative Strength Index (RSI) of 23 yesterday.

Short sellers were already headed for the exits, and a continued exodus could power additional gains. Short interest dropped by 15.8% in the two most recent reporting periods to 6.35 million shares. Yet this still accounts for more than 7% of DLPH's total available float, and 5.5 times the average daily trading volume. 

Delphi's normally quiet options pits have exploded in response to the news. At last check, over 2,000 calls have changed hands, 24 times the average intraday amount and a volume pacing for the 100th percentile of its annual range. Most of this attention is happening at the March 14 call, but there are also new positions being sold to open at the March 16 call. 

Prior to today, traders were much more focused on puts. Data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the equity's 10-day put/call volume ratio is 1.27, and ranks in the 88th annual percentile.

 

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