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Morning option trade alert: Newell Rubbermaid call action on take-over chatter
Call action in Newell Rubbermaid Inc. (NYSE: NWL) during the first hour of trading today suggests some investors are taking short-term bullish stances on the housewares retailer following takeover chatter that Procter & Gamble Co. (NYSE: PG) might have plans to acquire the company.
Around 10:30 a.m. EST, more than 3,700 March 15 calls and more than 7,100 April 17.5 calls changed hands at the ask prices of 50 cents per contract and 25 cents per contract, respectively. It looks like two separate investors bought these calls betting that the stock could rally in the short-term. Investors who bought the front-month 15-strike calls expect the stock to closer higher than $15.50 at March options expiration in nine trading days, while buyers of the April 17.5 calls will make money if NWL shares close higher than $17.75 when the options expire in 37 trading days.
The March 15 calls have climbed 25 cents so far today and have an implied volatility of 42%, while implied volatility of the April 17.5 calls, which are currently trading up 20 cents, is 50%. This compares to a 30-day historical volatility of 27%.
Rumors surfaced this morning that PG might have plans to acquire NWL, and the stock is currently up 24 cents, or 1.5%, to $15.24. NWL has not announce its next earnings release date, but the market expects the quarterly report sometime around April 29.
Traders can visualize these long call positions by opening a free virtual trading account and evaluate the risk/reward dynamics. NWL is just another in a long list of rumored takeover names so far in 2010.
For more on NWL:
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