Owens-Illinois Inc (OI) Options Heat Up on M&A News

Owens-Illinois Inc (OI) is higher after purchasing Vitro units, but option players are buying puts

May 13, 2015 at 11:00 AM
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Glass manufacturer Owens-Illinois Inc (NYSE:OI) is up 9.5% at $26.05, as shareholders applaud the company's expansion into Latin America. Option traders, on the other hand, are picking up OI puts at a rapid-fire rate, signaling expectations for a short-term pullback in the face of familiar resistance.

OI has seen roughly 1,300 puts change hands -- 50 times the intraday average. Nearly all of the action transpired at the now at-the-money May 26 put, where it looks like speculators are buying the contracts to open. The puts will move into the money if OI breaches $26 before the close on Friday, when front-month options expire. In light of the security's M&A rally, delta on the put fell from negative 1.00 to negative 0.46 overnight, reflecting the diminishing odds of an in-the-money expiration.

OI is now on pace to end the week atop its 40-week moving average for the first time since July. This trendline served as support for the stock for most of 2014, before a couple of bear gaps in the latter half of the year. However, the equity's upside momentum could stall in the $26-$27 region, which has capped OI's rebound attempts since late September.

Should Owens-Illinois Inc (NYSE:OI) break north of resistance, Wall Street could be caught off guard. Just one of 11 analysts considers OI worthy of a "buy" or better rating, and short interest grew nearly 24% during the most recent reporting period. 

 

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