TiVo dropped on a convertible-debt sale today, but one investor
optionMONSTER's Heat Seeker tracking system detected a large
multi-part transaction on the digital-recording stock, with 10,000
contracts trading in each of four different strikes.
August 8 calls were bought for $2.53, while August 7 puts were sold
for $1.01 and August 15 calls were sold for $0.52. A block of May
20 calls were sold for $0.06.
Volume was below open interest in the May contracts, but more than
triple open interest in the August options. That suggests a holding
in the May calls was closed and a new three-part strategy expiring
three months later was initiated.
Excluding the credit from selling the May calls, the August
position cost $1 to implement and will earn a maximum profit of 600
percent if TIVO closes at or above $15 on expiration. It will lose
money below $7.
TIVO is down 2.21 percent to $8.86 in early afternoon trading. It
fell almost 6 percent early in the session after announcing that it
would sell as much as $138 million of convertible notes, a move
that will dilute shareholders.
The stock has been wavering for more than a year between negative
and positive catalysts. Its earnings, including the last report on
March 1, have been poor. But, some traders hope it will win a legal
case against EchoStar and Dish Network in a decision expected in
April or May. One analyst at Gabelli said TIVO could more than
double if it prevails.
Overall option volume in the name is triple the daily average so
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.