Mobileye NV (MBLY) Deal-Making Drives Bullish Betting

Mobileye NV (NYSE:MBLY) is higher today on reports the firm has inked two new deals to develop self-driving cars

by Karee Venema

Published on May 13, 2016 at 10:48 AM
Updated on Jun 24, 2020 at 10:16 AM

Mobileye NV (NYSE:MBLY) is up 2.3% at $37.49, amid reports the software company has inked deals with two automakers to develop self-driving vehicles by 2019. According to Amnon Shashua -- the chairman and chief technology officer for MBLY -- the agreements are "fully committed," but he declined to name the specific partners. The positive price action has sparked a jump in early call volume, echoing a recent trend seen in MBLY stock's options pits.

Looking back, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 6,537 call options over the past 10 sessions, versus 2,020 put options. What's more, the resultant call/put volume ratio of 3.24 sits just 9 percentage points from a 52-week peak -- a sharp contrast to MBLY's late-April sentiment backdrop.

Drilling down, MBLY's May 37 call has seen the biggest rise in open interest over this time frame, with 5,107 contracts added. According to the major options exchanges, the bulk of these calls have been bought to open, as options traders bet on a breakout above $37 by next Friday's close, when the front-month series expires.

In fact, just yesterday, one speculator purchased a 3,847-contract block of the May 37 calls for $1.20 apiece. Thanks to today's pop, the bid price for these now in-the-money calls is $1.25, meaning the call buyer is already staring at a paper profit.

On the charts, MBLY has rallied more than 59% from its Feb. 9 all-time low of $23.57. As such, it's entirely possible that some of the recent call buying is a result of short sellers hedging their bearish bets against any additional upside -- considering more than 22% of MBLY's float is sold short.

It's also possible that part of the stock's positive momentum is due to short sellers calling it a day. While short interest declined 8.9% in the most recent reporting period, it would still take almost 16 days to cover all of MBLY's remaining shorted shares, at the stock's average daily pace of trading. Mobileye NV (NYSE:MBLY) could encounter a fresh burst of buying power, should short sellers continue to jump ship.

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