Tuesday, February 23, 2010

Millipore (MIL) - Takeover Bid Leaked, Stock Jumps $30 then Drops - Options Trade

MIL is trading 88.19. The LIVEVOL™ Pro Summary is below.

The news yesterday was that Bloomberg reported that Thermo Fisher Scientific (TMO) mad a $6 billion bid for MIL. With 55.6 million shares outstanding for MIL that translates into ~$107 stock price for MIL. I haven't seen any other confirmations or denials as of this writing. Millipore has hired Goldman Sachs as its financial advisor after receiving the bid, a source told Bloomberg.

The stock jumped from Friday's close of 71.34 all the way to 102.91 yesterday only to finally close at 87.35.

The company has traded over 7,300 options today in the first 30 minutes (not a typo) on total daily average option volume of just 454. A few of the larger trades today are some of the weirdest I have ever seen. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

Note a few trades:
(1) Mar 85 puts sold @ 2.65 vs. 2.65 x 3.20 option market.
(2) Mar 85 calls bot for 6.50 vs. 5.20 x 6.50 option market.

Those are 0.55 and 1.30 wide markets trading on the NBBO. That's craziness. As I am writing this, the largest prints came in - Mar 95/Mar 100 1x2 call spread. I have confirmed this is a purchase of 1 Mar 95 call against a sale of 2 Mar 100 calls 1320 x 2640 even though the prices sort of look like a call stupid - sale/sale. That spread has max gain at 100, and begins to lose (on the upside) if the stock goes through 105. Selling 2 calls means upside risk if the stock really rips, but also makes the spread half as expensive (0.50 vs. 1.00).

Needless to say, the skew has changed dramatically from Friday to today. Both skew charts are inlcued (click to enlarge).

Skew Legend:
Red - Front month
Yellow - Second month
Green - Third month
Blue - Fourth month

The front two months have exploded past the back months (red and yellow are higher than green and blue). Also, the calls are now bid in the front two months (the line extends to the right). Note also that the downside is now bid in the front and the second month retains it's smirk (downside high vol).

The Charts Tab snapshot is included for completeness (click to enlarge). The bottom portion of the chart are the vols: IV30™ (red) vs. HV20™ (blue). The yellow shaded area charts the vol difference.

This one may have some trading opportunities in it...

This is trade analysis, not a recommendation.

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