Rumor-Related Rally Lures SodaStream International Ltd (SODA) Bulls

SodaStream International Ltd is surging on a possible PepsiCo, Inc. stake

Dec 11, 2014 at 3:11 PM
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SodaStream International Ltd (NASDAQ:SODA) has tacked on 3.2% to trade at $20.76, amid unconfirmed chatter that PepsiCo, Inc. (NYSE:PEP) may take a 20% stake in the at-home carbonation issue. Accordingly, call volume is bubbling over at six times the expected intraday rate, and demand for short-term strikes is on the rise, per SODA's 30-day at-the-money implied volatility, which is up 23.9% at 60.3%.

Looking more closely, buy-to-open activity has been detected at the weekly 12/12 21-strike call, where 1,522 contracts are on the tape. These traders anticipate SODA will close tomorrow -- when the weekly series expires -- above $21. According to the market, the chances of this happening are 43%, per the option's delta of 0.43 (compared to 0.23 at last night's close).

Today's penchant for call buying is business as usual, as far as SODA is concerned. The stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 2.97, which registers in the bullishly skewed 78th percentile of its annual range.

It should be noted, however, that 16.4% of SodaStream International Ltd's (NASDAQ:SODA) float is sold short -- understandable, given the shares' year-to-date deficit of roughly 58%. Stated differently, it would take more than seven sessions to cover all of these bearish bets, at the equity's typical daily trading volume. Therefore, it's possible some of the recent call buying -- particularly at out-of-the-money strikes -- has been at the hands of short sellers seeking an upside hedge.

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