Option Bulls Bombard Harris Corporation (HRS) On M&A Surge

Harris Corporation (HRS) calls are trading at 20 times the average intraday pace

Karee Venema
Feb 6, 2015 at 1:55 PM
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Harris Corporation (NYSE:HRS) is surging today -- up 8.2% at $75.21, and in the black on a year-to-date basis -- as traders cheer the tech issue's multi-billion-dollar acquisition of Exelis Inc (NYSE:XLS). In the equity's options pits, calls are crossing the tape at a rate 20 times what's typically seen at this point in the day, and are outpacing puts by a nearly 8-to-1 margin.

Most active is HRS' March 75 call, which is being bought to open as speculators bet on a bigger rally over the next six weeks. Amid today's pop, delta on the call has jumped to 0.49 from 0.13 at last night's close, indicating an increased probability the option will be in the money at the close on Friday, March 20 -- when the options expire.

Today's call-skewed session is just more of the same for the stock, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 44.76 calls for each put over the past 50 sessions.

Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.15 rests at an annual low. In other words, short-term speculators are more call-heavy now on HRS than they've been at any other point during the past year.

Elsewhere, the brokerage bunch is reacting positively to the aforementioned news, as well as the company's fiscal second-quarter earnings beat. Just minutes ago, Cowen and Company upgraded Harris Corporation (NYSE:HRS) to "outperform" from "market perform," and boosted its price target by $23 to $86.


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