Today’s tickers: DOW, ROH, CVS, LDK, KEY & C
DOW – Dow Chemicals Company – We noted in our Wednesday commentary that emergent talk that the K-Dow joint-venture with Kuwait was on the ropes. Over the weekend the Kuwaitis landed a crunching body-blow as they called off the agreement to invest in Dow’s chemical business sending its shares reeling to the canvas with a 20% loss in value to $15.00. The investment was meant to help cut costs for the company as well as fund the acquisition of Rohm & Haas whose shares dropped by the same amount. Option traders seized the opportunity Wednesday to boost put positions at the January 17.5 strike ahead of the year end deadline for the deal, while today they are having to lower their expectations further to the 15.0 strike where volume of more than 8,000 lots stacks up at least four times when compared to existing open interest. Premium at the strike is 1050% higher today at 1.15 per contract compared with just 10 cents at Friday’s close. Bearish investors also paid a 35 cent premium to buy puts at the 12.5 strike also expiring in January. Call volume was also reasonably well represented, but much was instigated by sellers of premium, either from bearish investors or from investors quitting established positions. Calls at the January 15, 17.5 and 20 strikes were all sold as were February expiration calls at the 17.5 strike, which fetched one dollar per contract.
ROH – Rohm & Haas Co. – Last week’s conjecture that an unwed Rohm might only be worth around $20 per share isn’t really grabbing that much more attention from option traders today. We have noted put activity at the January 25 strike at a 70 cent premium but much of this activity appears to have come from sellers. With shares now trading at $51.80 and off today’s $47.23 low print, investors seem to be more prone to taking the view that its shares will at least find a floor above the pre-deal price in July of $45 per share rather than lower. As such put options are seeing a good two-way flurry of activity as traders play the ebb and flow in the share price as investors in the underlying aim for a better sense of accurate price discovery. Curiously the most actively traded contracts today are well out-of-the-money calls at the January 70 and 75…
Did you like this article?
Submitted By 
's
