M&A Buzz Stirs Up Sodastream International Ltd (SODA) Options Pits

Sodastream International Ltd (SODA) option bulls are acting on M&A buzz

by Josh Selway

Published on Jul 8, 2016 at 2:23 PM
Updated on Jun 24, 2020 at 10:16 AM

In-home beverage stock Sodastream International Ltd (NASDAQ:SODA) is making waves today, thanks to unsubstantiated rumors that PepsiCo, Inc. (NYSE:PEP) is interested in buying the company. SODA stock was last seen 7% higher at $23.85, earlier topping out at an annual peak of $24. SODA options traders are also taking notice, with calls trading at five times the intraday norm. 

Digging deeper, SODA calls account for all 10 of the stock's most popular options today. The August 25 call is the most active, followed by the weekly 7/8 23-strike and July 24 calls. It appears traders are buying new positions at each of these strikes, betting on SODA to keep pushing higher through the respective expiration dates. 

This call bias isn't unusual. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals more than four SODA calls have been bought to open for each put during the past 20 sessions. Even more notable is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.14, which ranks in the 5th percentile of its annual range. In short, traders targeting options that expire in three months or less are more call-skewed than normal. 

The stock's Schaeffer's Volatility Index (SVI) suggests it's a good time to be a SODA options buyer. This reading, at 47%, ranks below 86% of all others taken in the past 12 months. This means the options market is pricing in historically low volatility expectations at the moment. 

Shifting our attention outside the options arena, almost 11% of SODA's float is sold short. Although this figure declined by 12% in the past two reporting periods, it would still take bears six sessions to cover their shorted shares, at the stock's average daily volumes. Considering this, it's possible some of the recent rush for long calls was due to short sellers looking to hedge

Hedging wouldn't be a bad idea for these bears, either, given Sodastream International Ltd's (NASDAQ:SODA) long-term technical performance. Since dipping below $12 back in February, SODA has more than doubled in value. Despite this surge, three-fourths of covering analysts say the stock is just a "hold." So, not only could SODA stock keep rallying on a potential short-squeeze situation, but a round of bullish analyst attention could also be in store. 

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