Rallying Penn Virginia Corporation (PVA) Sees a Rare Surge in Calls

Penn Virginia Corporation (PVA) is higher today on news the company may be putting itself up for sale

by Karee Venema

Published on Feb 26, 2015 at 10:48 AM
Updated on Apr 20, 2015 at 5:32 PM

Similar to yesterday's action on drugmaker Pharmacyclics, Inc. (NASDAQ:PCYC), Penn Virginia Corporation (NYSE:PVA) has gapped higher today on reports the oil-and-gas issue is considering putting itself up on the auction block -- news that's overshadowing a wider-than-expected fourth-quarter loss. Meanwhile, in the options pits, call volume has jumped to 14 times what's typically seen at this point in the day, and per the equity's 30-day at-the-money implied volatility -- which is up 8% at 91.2% -- short-term contracts are in high demand.

Drilling down, PVA's March 8 call has received notable attention. Roughly 2,550 contracts have changed hands here, and it appears the majority of positions have been bought to open. By initiating the long calls, speculators expect PVA to topple the $8 mark by the close on Friday, March 20 -- when front-month options expire.

Today's accelerated call activity marks a change of pace in PVA's options arena. At 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 0.37 ranks higher than 70% of similar readings taken in the past year. In other words, puts have been bought to open over calls at a faster-than-usual clip.

This withstanding skepticism shouldn't be too surprising, considering the stock was staring at a 58% year-over-year deficit heading into today's session. Thanks to today's 14.2% surge that has PVA trading near $7.08, though, the equity is back in the black on a year-to-date basis. As such, it's possible that some of this morning's buy-to-open activity at the out-of-the-money March 8 call could be a result of short sellers hedging against any more upside. Nearly 35% of the equity's float is sold short, which would take more than six sessions to cover, at Penn Virginia Corporation's (NYSE:PVA) average daily pace of trading.

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