Today’s tickers: DOW, ROH, PHM & SYMC
DOW – Dow Chemicals Company – It seems like many moons ago in July that Dow Chemicals offered to pay $78 per share to buy specialty chemicals maker, Rohm and Haas Co. In order to do so they are relying on a special dividend payment from a deal involving the Kuwaitis where Dow is going the extra yard to convince its people that the proposed K-Dow joint-venture would be a good deal for employment in the kingdom. An opposition party has other ideas and the deal, which is supposed to go through by December 31 is now looking shaky according to CNBC commentators. Dow is trading up at $19.39 while option traders appear to be playing both sides of the tape. January calls spreads appear the order of the day where the 22.5 strike has been bought against sales of the 25 strike for around 20 cents net premium. Meanwhile, investors are also happy to pay a 50 cent premium for puts at the 17.5 strike in the event that Dow is punished by investors if they fail to reap any cost-efficiencies from either venture.
ROH – Rohm & Haas Co. – Shares have so far slipped 1.9% to $64.16 as the K-Dow deal is called into question. Further, speculation that Rohm might only be worth $20 per share without a Dow tie-in has put bear options strategies on the table this morning. Investors have sold call options at the January expiration where some 2,000 calls were sold at for a 1.70 premium at the 70 strike price. On the put side of the coin, investors paid heavy premiums to acquire rights to sell shares before January’s expiration at the fixed price of 60 and 50. At the higher strike, investors bought around 1,000 puts at 7.80 each while the 50 strike saw similar volume at a still costly 5.40 premium. That’s to be expected under the shroud of uncertainty of a takeover apparently facing jeopardy where implied volatility on the options at 121% keeps premiums lofty.
PHM – Pulte Homes Inc. – The housing market remains in the doldrums and despite the surge in mortgage refinancing applications, we guess this isn’t doing a lot for home builders at this stage. Shares at Pulte are 2% lower at $10.32 while options bears it seems have been on the prowl. From what we can see it appears that a buyer has lifted 9,000 put options expiring in January at the 5 strike, which implies that shares will fold in half before then. The puts were offered at a measly 5 cent premium for the first half hour of the day before a 9,000 lot trade was recorded. At the higher 7.5 and 10 strikes put buyers were also in evidence where 1,600 contracts traded at a 25 cent premium and 3,200 lots traded at an 85 cent premium respectively.
SYMC – Symantec Corp. – We don’t see much of a catalyst for relatively high volume on Symantec this morning but we’re seeing activity at the 12.5 strike puts options in both February and April contracts. In the February contract only 149 positions were in existence ahead of today, while some 2,200 lots were added today for a premium of just 1.25. With its shares at $12.77 the breakeven would be at $11.25 in February for these investors. The most volume occurred on the call side where investors established a fresh and healthy long position betting that shares will advance before the option contract expires in February. Investors bought 6,248 call options offering rights to acquire shares at a fixed $15.00 before expiration and paid a 55 cent premium for the right to do so.
