Mobileye NV (MBLY) Options Heat Up as Stock Rallies

A note from the Mobileye NV (MBLY) board has option bulls champing at the bit

by Andrea Kramer

Published on Mar 5, 2015 at 2:11 PM
Updated on Apr 20, 2015 at 5:32 PM

Driver-assistance software provider Mobileye NV (NYSE:MBLY) has rocketed 6% higher to $36.89, after the company's board said it may not proceed with a secondary offering due to lackluster sell-side demand. Against this backdrop, option players are scrambling to place bullish bets on MBLY, which is testing resistance at its 10-week moving average.

Weekly Chart of MBLY since October 2014 with 10-Week Moving Average

Intraday call volume is running at twice the average clip, and is outpacing MBLY put volume by a margin of roughly 5-to-1. Most popular is the out-of-the-money March 39 call, which has seen buy-to-open activity. By purchasing the calls to open, the buyers expect MBLY to muscle north of $39 -- a feat not accomplished in a month -- by the close on Friday, March 20, when front-month options expire.

In light of the equity's surge today, delta on the call has doubled, to 0.26 from 0.13 at yesterday's close. In other words, the contracts now have about a 26% chance of expiring in the money.

However, it's worth noting that short interest on Mobileye NV (NYSE:MBLY) -- which has shed about 9% in 2015 -- represents 14.5% of the stock's total available float. At the equity's average pace of trading, it would take more than six sessions to repurchase these pessimistic positions. With short interest elevated, it's possible that today's call buyers are short sellers looking to hedge against an extended rally in the short term.

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