Textron attracted bullish option activity yesterday as the Royal Bank of Canada cited the company as a possible breakup candidate.
optionMONSTER's Heat Seeker system detected heavy buying in the August 30 calls, which saw more than 3,400 contracts trade for $0.28 to $0.39. That volume was 15 times higher than the strike's open interest of just 224 before the session began, indicating new activity.
These long calls lock in a $30 purchase price for the stock no matter how far it might rise, but they will expire worthless if TXT remains below that level through expiration in mid-August. The options could also be sold earlier at a profit if premiums rise with a rally before then. (See our Education section)
TXT rose 1.47 percent to $28.96 yesterday, its highest close since April 16, the day before gapping down on first-quarter results. In its second-quarter report last Wednesday, Textron beat earnings estimates but came up short in revenues.
An RBC analyst said yesterday that the Providence, R.I.-based company could be worth $42 a share if it is broken up, according to Bloomberg report. Textron is best known for its Cessna jets and Bell helicopters but also manufactures car parts, telecom gear, golf carts, and turf equipment.
Total option volume in the name was just shy of 5,300 contracts, more than 8 times its daily average for the last month. Overall calls outnumbered puts by a bullish 9-to-1 ratio.
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