Dick's Sporting Goods, Inc. (DKS) Bull Places Well-Timed Bet

Dick's Sporting Goods Inc (DKS) rallied on going-private buzz, and one trader bought timely call options

by Andrea Kramer

Published on Jan 7, 2015 at 1:01 PM
Updated on Jun 24, 2020 at 10:16 AM

Dick's Sporting Goods Inc (NYSE:DKS) rocketed higher around midday -- and was temporarily halted -- amid reports the company is considering going private. At last check, the equity was flirting with a 9.8% gain at $54.06 -- in territory not charted since April -- and short-term bulls are circling the athletic apparel retailer in the options pits.

Daily Chart of DKS since April 2014

Demand for the equity's short-term contracts, particularly on the call side, is sky-high. The stock's 30-day at-the-money implied volatility has surged 45.4% to 41.4%, and calls are trading at four times the typical intraday rate. What's more, DKS calls outnumber puts by a margin of nearly 10-to-1.

One fortuitous trader initiated a sweep of roughly 2,000 January 2015 53-strike calls, buying them to open for roughly a quarter apiece, right at the start of DKS' bull gap -- around 12:08 p.m. ET. Those contracts are now being asked at $3.60 apiece -- more than 14 times what the speculator paid -- not even an hour later. Delta on the call has surged to 0.63 from 0.11 at yesterday's close, implying a 63% chance of expiring in the money on Friday, Jan. 16.

Today's affinity for bullish bets represents an about-face in the options arena. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 5.54 stands just 1 percentage point from an annual high. In other words, Dick's Sporting Goods Inc (NYSE:DKS) speculators have been buying puts over calls at a much faster-than-usual clip during the past two weeks.


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