Option Traders React to Pandora Media Inc (P) CEO Shake-Up

Calls are flying off the shelves after Pandora Media Inc (NYSE:P) named a new CEO

by Josh Selway

Published on Mar 28, 2016 at 10:46 AM
Updated on Mar 28, 2016 at 10:47 AM

On Thursday, Pandora Media Inc (NYSE:P) exploded for a 10.6% win, thanks to unsubstantiated sale rumors. But the stock has already given back much of those gains this morning, down 9.2% at $9.92, on news CEO Brian McAndrews is leaving the company and will be replaced by founder Tim Westergren. The stock is now short-sale restricted, and activity has picked up in the options pits. 

By the numbers, P calls are crossing at 15 times the intraday average, and are outpacing puts by a more than 26-to-1 margin. The most popular strike is the May 13 call, and Trade-Alert suggests one option player may be liquidating his position here. Meanwhile, it looks like another trader bought to open a block of 791 weekly 4/22 10-strike calls, gambling that the shares will muscle back into double-digit territory by the close on Friday, April 22, when the series expires.

It's not uncommon to see a preference for P calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, more than 17 long calls have been initiated for every long put during the past two weeks. The resulting call/put volume ratio of 17.38 is just 4 percentage points from an annual high.  Of course, some of this call-buying activity could be the work of short sellers hedging, considering 15.8% of the stock's float is sold short.

And even though Pandora Media Inc (NYSE:P) has trailed the broader S&P 500 Index (SPX) by more than 18 percentage points in the past three months, analysts are mostly bullish, too. Specifically, 11 call the stock a "buy" or better, with 14 deeming it a "hold" and none calling it a "sell." As such, P could continue to struggle on the charts, if some of this widespread optimism on Wall Street begins to unwind

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