Buyout Buzz Draws Option Bulls to Endo International plc (ENDP)

Endo International plc - Ordinary Shares (NASDAQ:ENDP) is surging on takeover chatter

by Karee Venema

Published on Aug 3, 2016 at 2:25 PM
Updated on Jun 24, 2020 at 10:16 AM

Takeover chatter is swirling around Wall Street today, and boosting not only one notable tech stock, but also shares of biotech Endo International plc - Ordinary Shares (NASDAQ:ENDP). At last check, ENDP stock was up 7% at $18.31 -- and short-term options traders are calling for even higher highs by week's end.

Taking a quick step back, ENDP call options are trading at nearly two times what's typically seen at this point in the day, and are outpacing put options by a roughly 20-to-1 ratio. Most active are the stock's weekly 8/5 17.50- and 18-strike calls, where it looks like new positions are being purchased. If this is the case, the goal of the call buyers is for ENDP to extend today's rally through this Friday's close, when the weekly series expires.

Today's accelerated call activity marks a change of pace in ENDP's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, options traders have bought to open nearly 12 puts for each call over the past 10 sessions. What's more, the resultant put/call volume ratio of 11.67 ranks just 1 percentage point from a 52-week peak.

Drilling down, the majority of these put buyers have targeted ENDP's August 17 strike, considering more than 3,500 new positions were initiated here over the same two-week time frame. According to the major exchanges, the vast majority of this action was of the buy-to-open kind, meaning speculative players are betting on the stock to close south of $17 when the options expire at the close on Friday, Aug. 19.

Technically, the stock has been a long-term laggard, down nearly 79% year-over-year. Plus, since its early May guidance-induced bear gap, shares of Endo International plc - Ordinary Shares (NASDAQ:ENDP) have been stuck churning south of $18.50. Regardless of where the security settles at options expiration, though, the most any options buyer stands to lose is the initial premium paid.

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