Pandora Media Inc (P) Call Players Pounce On M&A Rumors

Pandora Media Inc (P) stock popped this morning on buyout buzz, sending call options volume soaring

Dec 2, 2016 at 12:03 PM
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Pandora Media Inc (NYSE:P) is making headlines as buyout rumors fly. After initial reports from CNBC that the streaming service was open to M&A offers, and even reportedly engaging in talks with long-time suitor Sirius XM Holdings Inc. (NASDAQ:SIRI), conflicting reports are now saying that P is not making an effort to sell itself, but rather is focused on "executing its strategy and operating model." As P stock soars amid contradictory rumors, option players are betting on more upside.

P initially popped more than 17% to $13.47, but has since pared its gains to sit up 9.5% at $12.61. P has pulled back since its October highs, but the shares found support in the $10 region, which is approximately equal to a 61.8% Fibonacci retracement of P's February-to-October rally. The shares could also find a foothold at the $12 level, which is a 38.2% Fibonacci retracement of the same rally, and home to P's 160-day moving average.

P 161202

In the option pits, calls are crossing the line at an accelerated pace -- eight times the average daily rate, outpacing puts nearly 9-to-1, though call volume seems to have slowed since the second report refuted the initial M&A rumors. Stock volume is on pace to tap an annual high, while option volume and call volume are on pace to finish just 1 percentage point from an annual peak. Drilling down, the weekly 12/2 13-strike call is today's most active option, with possible buy-to-open activity detected, as traders bet on continued upside through the end of the day.

Widening the scope, this appetite for calls is nothing new in P's option pits. P's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 8.54 sits in the 83rd percentile of its annual range, suggesting P traders have been especially bullish as of late. In addition, P's Schaeffer's put/call open interest ratio (SOIR) of 0.30 sits in the 12th percentile of its annual range, indicating near-term option players are more call-skewed than usual.

Specifically, the deep out-of-the-money December 18 call is P's top open interest position, followed by the December 20 call. However, buyers of the calls may have been short sellers hedging their bets, especially considering the uptick in short interest Pandora Media Inc (NYSE:P) has seen lately. P's short interest is up 23.5% over the last two reporting periods, and now accounts for more than a quarter of the stock's float. It would take traders nearly seven days of trading -- at P's average daily volume -- to cover these pessimistic positions.

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