Call Players Rush Carmike Cinemas, Inc. (CKEC) on M&A News

Carmike Cinemas, Inc. (CKEC) calls are trading at 46 times the average intraday pace

Mar 13, 2015 at 2:22 PM
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Similar to fellow Nasdaq component Pandora Media Inc (NYSE:P), Carmike Cinemas, Inc. (NASDAQ:CKEC) is soaring today, as takeover chatter circulates. Specifically, the stock is up 12.2% at $34.80, on reports the firm is exploring strategic alternatives, including possibly putting itself up on the auction block. Today's rally has sparked a flurry of activity in the equity's options arena, with calls crossing the tape at a rate 46 times the intraday average. Meanwhile, the equity's 30-day at-the-money implied volatility has jumped 34.6% to an annual high of 50.2%, signaling elevated demand for short-term contracts.

Drilling down, CKEC's March 35 call has received the most attention thus far, and appears to be seeing a mix of buy- and sell-to-open activity. For those purchasing the calls, the expectation is for the security to rally north of $35 through next Friday's close, when front-month options expire. Conversely, those who are writing the calls are betting on the stock to stay south of $35 through expiration. Of note -- CKEC topped out at an intraday peak of $34.94 earlier.

Elsewhere, the equity's April 40 call has garnered its fair share of attention, and all signs suggest new positions are being purchased. By initiating these long calls, traders are gambling on CKEC to rally north of the round-number $40 mark -- and into territory not explored since June 2004 -- over the next five weeks. Delta on the call is perched at 0.22, suggesting a 22% chance the option will be in the money at the close on Friday, April 17 -- when back-month options expire.

Today's rush toward calls runs counter to the withstanding trend seen in the equity's options arena. Over the course of the past 50 sessions, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 3.05 puts for every call. Echoing this is CKEC's Schaeffer's put/call open interest ratio (SOIR) of 1.53, which ranks in the 60th annual percentile. Simply stated, short-term speculators are more put-heavy than usual toward Carmike Cinemas, Inc. (NASDAQ:CKEC).

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