Options Fly as Buyout Buzz Boosts Tumi Holdings Inc (TUMI)

Tumi Holdings Inc (TUMI) is fresh off a three-year high, following reports Samsonite may buy the luggage maker

Mar 3, 2016 at 10:43 AM
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Tumi Holdings Inc (NYSE:TUMI) is blowing up on buyout buzz. Specifically, the stock is 28.4% higher at $25.84 -- and on track for its best day in four years -- after The Wall Street Journal reported Samsonite is on the verge of acquiring the designer luggage maker. Not surprisingly, TUMI's options pits are seeing accelerated activity, as traders place bets on the stock's short-term trajectory.

While just 972 TUMI puts are on the tape, this is 138 times the expected intraday amount. In the lead is the out-of-the-money April 25 put, where it appears traders are both buying and selling to open positions -- with International Securities Exchange (ISE) data confirming the latter. If this is the case, the buyers are hoping TUMI reverses back below $25 by April expiration, while the option writers believe the quarter-century level will act as support throughout the put's lifetime.

Elsewhere on the Street, sentiment is decidedly bearish toward TUMI. Two-thirds of covering analysts rate the stock a "hold" or "sell," while 13.2% of its float is sold short. At TUMI's average daily trading volumes, it would take over 13 sessions for short sellers to buy back their bets.

These bears could be feeling the heat, given Tumi Holdings Inc's (NYSE:TUMI) gap higher today. In fact, the shares earlier notched a three-year high of $27.84, and have swung from a year-over-year loss to an annual gain -- which currently stands at more than 11%.

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