Kohl's Options Turn Red Hot as Acquisition Rumors Ramp Up

The equity is pacing for its highest close in months

Digital Content Manager
Jan 24, 2022 at 12:46 PM
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The shares of long-standing department store name Kohl's Corporation (NYSE:KSS) have surged to the top of the New York Stock Exchange (NYSE) today, last seen up 33.3% at $62.47, as takeover bids continue to trickle in. This time, Sycamore said it would pay $65 per share for Kohl's, topping Starboard Value-backed Acacia Research's (ACTG) offer of $64, which came in two days prior. While those familiar with the matter requested anonymity, as these discussion are private, Kohl's did say it has received letters from several suitors hoping to acquire the business. 

Options are flying off the shelves in response to today's news and subsequent surge in shares. So far, 22,000 calls and 35,000 puts have been exchanged, which is five times the intraday average. The most popular position is the March 50 put, followed by the weekly 2/4 40-strike put. Positions are being sold to open at the former, suggesting these traders are eyeing a floor at the $50 level for the underlying stock once these contracts expire. 

Even before today's trading frenzy, KSS was making waves in the options pits. In fact, the stock showed up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks on the S&P 400 (IDX) that have attracted the highest weekly options volume over the last two weeks. Per White's list, 222,517 calls and 175,457 puts exchanged hands during that time period. The January 52.50 call, which expired last Friday saw the most attention, followed closely by the weekly 1/14 50-strike call.

mao jan 24

Today's penchant for puts is definitely unusual, as calls were king over the past couple of months. This is per Kohl's stock's 50-day call/put volume ratio of 2.63 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 84% of readings from the past year, suggesting a healthier-than-usual appetite for long calls of late. 

Meanwhile, KSS is heavily shorted, with short interest rising 9.5% in the last two reporting periods and making up 11.6% of the stock's available float. It would take almost a week to buy back these bearish bets, at the stock's average daily pace of trading, which could put additional wind at the equity's back, should today's surge spook these bears and convince them to jump ship. 

The stock's climb today is impressive, especially considering how badly the broader market is doing right now. When we checked on Kohl's stock last week, it was busy toppling its year-to-date breakeven. Now, the shares are sitting well above this level, with a 27.5% year-to-date lead. Plus, the equity toppled another area of pressure at its 140-day moving average, and is looking to notch its highest close in over eight moths, should these gains hold. 

kss jan 24

 

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