M&A Talk Fires Up Cabelas Inc, Cypress Semiconductor Corporation Options Traders

Cabelas Inc (NYSE:CAB) and Cypress Semiconductor Corporation (NASDAQ:CY) are both soaring on M&A chatter

Jul 14, 2016 at 11:54 AM
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U.S. stocks are moving higher today, and that includes retailer Cabelas Inc (NYSE:CAB) and tech name Cypress Semiconductor Corporation (NASDAQ:CY)​. Helping the stocks is the latest round of M&A chatter. Specifically, reports indicate CAB is close to selling itself to Goldman Sachs and Bass Pro Shops; meanwhile CY is also reportedly exploring strategic options, with three private equity firms rumored to be interested in a takeover. Suffice it to say, today's news could have major implications for CAB and CY options traders. 

CAB was last seen up 3.5% at $54.50, after earlier touching an annual high of $54.84. Aside from the potential M&A developments, news that the company is expanding to two new locations is also helping the shares. CAB stock is now almost 17% higher in 2016, and options traders have been buying calls at a breakneck pace. 

For instance, the stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 12.56, which ranks in the 87th annual percentile. Reinforcing this call-skew is CAB's Schaeffer's put/call open interest ratio (SOIR) of 0.30, revealing call open interest triples put open interest among options expiring within three months, and resting in the bottom quartile of its annual range. 

Not all of this call action has been bullish, though. Specifically, the August 55 call added the most open interest by far over the past two weeks, and data from the major options exchanges confirms a preponderance of sell-to-open activity. In other words, these traders are looking for the $55 level to act as a technical ceiling through the close on Friday, Aug. 19, when the options expire. 

In today's trading, Cabelas Inc (NYSE:CAB) calls are trading at six times the norm, with volume already nearing a 12-month high. Among the most popular strikes is the August 60 call, where it's possible traders are purchasing fresh positions, betting on extended gains from CAB stock over the next month. 

Turning to CY, the stock is putting up even more impressive gains, last seen 4% higher at $11.32, sending the shares past the $11 mark that has given them trouble since the end of last year. Moreover, the stock has stormed higher since its six-year low of $6.30 in February, and options traders have been eyeing even more upside. 

CY boasts a 50-day call/put volume ratio of 24.96 at the ISE, CBOE, and PHLX, ranking in the 82nd annual percentile. What's more, calls account of nine of the stock's top 10 positions, going by open interest, and total call open interest now sits at a 52-week peak, at more than 400,000 contracts.  

Today, while call volume has a big edge in absolute terms, Cypress Semiconductor Corporation (NASDAQ:CY) puts are trading at five times the normal intraday rate. This is mostly due to heavy interest in the August 11 put, where it looks like traders may be selling to open positions, hoping for CY to hold above this level in the weeks ahead. 

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