Harley-Davidson Inc (HOG) Options Volume Booms on Buyout Chatter

M&A rumors have Harley-Davidson Inc (NYSE:HOG) surging higher

Jul 1, 2016 at 11:51 AM
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Harley-Davidson Inc (NYSE:HOG) stock is exploding today on unsubstantiated takeover chatter. HOG shares were last seen 14.2% higher at $51.72, with stock volume on par to close just 1 percentage point from 12-month highs. What's more, HOG options are also trading at an intense rate, with call volume already setting a single-day annual high. 

Looking closer, HOG calls are trading at an incredible 84 times the average intraday pace, almost tripling the rate of puts. The mad dash for HOG options is further illustrated by the the stock's 30-day at-the-money implied volatility, which has also surged to an annual high of 67.8% -- more than doubling since yesterday's close. 

The most popular HOG options are the July 47.50 and 50 calls, with buy-to-open activity taking place at each. This means traders are betting on extended gains from the stock through front-month options expiration on Friday, July 15. Interestingly, it appears the top trade on the 50-strike call took place at 10:42 a.m. ET -- literally minutes before HOG began surging upward, when the shares were trading at $46.60. 

What's more, this pursuit of HOG calls is in stark contrast to what's usually seen in the stock's options pits. Specifically, HOG's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 2.51 is just 1 percentage point from a 12-month high. This means puts have been bought to open over calls at a much faster-than-usual pace in recent weeks. 

Outside the options pits, today's price action is terrible news for short sellers. In fact, 16% of HOG's float is sold short -- or 14 times the stock's average daily trading volume. This is the highest reading since April 2010. 

Today's pop puts Harley-Davidson Inc (NYSE:HOG) on pace to close above its 320-day moving average for the first time since December 2014, not to mention back into positive year-to-date territory. Coming into today, HOG stock had lost over 19% in the past 12 months. 

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