Altera surges on INTC bid story
Altera (Ticker: ALTR) doesn’t have a ton of open interest in its options – just 106,000 contracts at last count. However, a late-Friday breaking news story suggesting Intel would make its largest takeout to date with an acquisition of Altera, left some call buyers sitting pretty.
Calls with a 36.0 strike in the April expiration saw volume of around 3,158 contracts as the story broke, where speculators paid no higher than 35¢ per contract. Open interest at the April 36.0 strike was a meager 499 contracts as of Thursday’s close. All 36.0 strike calls in play today traded at 3:32:38 pm ET, with the exception of around 200 lots that traded this morning and earlier in the afternoon for 25- to 35¢.
With shares in Altera jumping from $34.58 to $43.65 today, those calls have moved in-to-the-money and briefly traded at $4.00 per contract. Heading into the close the call options were bid $7.60 with the best offer at $9.30, without trading any further. An approximate $110,000 outlay to purchase 3,158 of the 36.0 strike calls at 35-cents soared to a value of roughly $2.5 million in a matter of minutes given the closing bid of the day of $8.10 per contract. Implied volatility in the name surged by 135% to 60% during hectic afternoon trading for the underlying.
Chart – Implied volatility surges on Intel news