Traders Rush Toward Pandora (P) Calls On Spotify Reports

Pandora Media Inc (P) calls are trading at 1.6 times the average intraday pace

Apr 13, 2015 at 10:44 AM
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Streaming music issue Pandora Media Inc (NYSE:P) is up 2.9% this morning at $17.49, on reports that a new round of funding is valuing sector peer Spotify at roughly $8.4 billion. Today's price pop has sparked a rush of call activity in P's options pits, with the contracts trading at 1.3 times the average intraday rate -- and outpacing puts by a nearly 2-to-1 ratio.

Most active is P's June 18 call, where it appears speculators could be initiating new long positions. If traders are indeed buying the calls to open, the goal is for P to rally north of the $18 mark through the close on Friday, June 19, when the series expires. Amid today's move higher, delta on the call has risen to 0.50 from 0.45, signaling an increased probability of an in-the-money finish.

Widening the sentiment scope reveals today's accelerated call activity is just more of the same. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), P's 50-day call/put volume ratio of 5.13 ranks in the 99th annual percentile. With a lofty 16% of the equity's float sold short, though, a portion of this call buying may be a result of short sellers hedging their bearish bets.

Technically speaking, P has been a long-term laggard, shedding 31% over the past 52 weeks. However, the equity has been gaining some ground in recent weeks, and since hitting an annual low of $14.50 on March 11, Pandora Media Inc (NYSE:P) has tacked on 21%.

Daily Chart of P Since April 2014
 

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