UPDATE 1-Lam Research shares, calls surge on takeover talk
Thu May 24, 2007 6:54pm ET
By Doris Frankel
CHICAGO, May 24 (Reuters) - Lam Research Corp. (LRCX.O: Quote, Profile , Research) shares rose as much as 4.7 percent and options volume surged on Thursday on speculation the supplier of tools that make microchips may be acquired.
Lam Research shares were up $1.62, or 3.19 percent, at $52.44 at the close after scoring to a high of $53.23 on the Nasdaq.
"Lam (shares) spiked higher in afternoon trading. The strength was attributed to takeover chatter," said Frederic Ruffy, an analyst at options education firm Optionetics in Redwood City, California.
"Obviously, given the number of recent mergers and equity buyouts lately, rumors spread easily."
A spokesman for Lam, which makes tools for etching circuitry on silicon wafers, declined to comment.
The shares of the Fremont, California-based company have gained 13 percent in the last three months.
In the options market, the speculation sparked a rise in Lam's option implied volatility as investors braced for a stock move, as well as call volume, said Paul Foster, options strategist at Web information site theflyonthewall.com in Chicago.
In all, 44,847 calls traded in Lam, compared with 9,470 puts -- more than 12 times normal options volume, market research firm Track Data figures showed.
Lam was one of the stocks with unsubstantiated takeover rumors being reported by multiple sources and is seeing near- term call buyers, wrote Stacey Briere Gilbert, chief options strategist at Susquehanna Financial Group in a note to clients on significant options activity in several stocks.
Investors often buy equity calls, which grant the right to buy the security at a present price and time, hoping to profit from a share rally. Puts convey the right to sell the stock.
"Throughout the morning, opening investors bought 8,500 June 55 calls and 3,500 July 55 calls," Briere Gilbert said.
Since then, some investors quickly took profits off the table by selling those calls, which give them the right to buy the stock at $55 a share within the next few weeks.
"The buyers of the LRCX June 55 calls jumped in for under 50 cents and soon after, the rumors spiked the stock and the options and many turned a quick profit and sold," said Pete Najarian, co-founder of optionmonster.com.
At the close, the June 55 calls traded 20,403 times and cost $1.30 a contract, up 95 cents on the day. The July 55 calls had volume of 8,932 contracts and fetched $2.40, up $1.10. (Additional reporting by Duncan Martell in San Francisco) |
