Lexmark International (LXK) Bears Aren't Buying the M&A Hype

Lexmark International Inc (LXK) is higher today, after announcing the purchase of Kofax Ltd (KFX)

Mar 25, 2015 at 10:41 AM
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It's a big day on the M&A front, and Lexmark International Inc (NYSE:LXK) is no exception. The stock is up 5.4% at $42.92, after the image solutions specialist said it would buy Kofax Ltd (NASDAQ:KFX) for roughly $1 billion (KFX, meanwhile, has surged 45%, and is lingering in record-high territory). Options traders aren't convinced LXK can sustain this positive price action, though, with puts crossing the tape at 13 times the average intraday pace.

Drilling down, nine of LXK's 10 most active options reside in the front-month series, with the April 44 and 45 puts receiving the most attention. It seems safe to assume new positions are being purchased, as speculators roll the dice on the stock to reverse its current course through the close on Friday, April 17 --when the options expire.

Widening the sentiment scope reveals today's accelerated put activity is just more of the same. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LXK's 10-day put/call volume ratio of 63.46 ranks in the 98th annual percentile. Echoing this put-skewed bias is the equity's Schaeffer's put/call open interest ratio (SOIR) of 3.08, which rests higher than all other readings taken in the past year. Simply stated, short-term speculators are more put-heavy now than at any other time within the last 52 weeks.

Technically speaking, shares of Lexmark International Inc (NYSE:LXK) have been trending lower since hitting a seven-year high of $51.77 in mid-August, off 17%. Meanwhile, today's surge is stalling out near familiar resistance in the $45 region -- an area that capped the equity's advances last month.

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