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Weatherford International Plc benefited from merger talks between two sector peers
Weatherford International Plc (NYSE:WFT) tacked on nearly 6% yesterday due to merger talks between Halliburton Company (NYSE:HAL) and Baker Hughes Incorporated (NYSE:BHI). This development was met with enthusiasm in WFT's options pits, where volume ran at triple the single-day average.
Diving right in, the energy stock's in-the-money November 16 call was the most actively traded strike, with nearly 11,000 contracts exchanged on Thursday. The majority crossed at the ask price, implied volatility gained 7.2 percentage points to 50.6%, and open interest spiked by more than 3,600 contracts overnight -- collectively suggesting at least some of the WFT calls were bought to open.
As alluded to, the aforementioned options are already in the money -- even thought the stock has given back 0.6% this morning to trade at $16.23. However, in order to profit at next Friday night's expiration, shares of Weatherford International Plc (NYSE:WFT) will need to settle above breakeven at $16.40 -- or the strike plus the volume-weighted average price of $0.40.