Unusual Options Activity

1. ADT- More than 6,000 Mar $39 calls have traded in just over the first two hours of trading (majority bought on the offer for $0.80 each), against open interest of 701 contracts. The call to put ratio was 46:1 and call activity was 3x the average daily volume (implied volatility +14.4% to 32.73). The $6.7B home security company trades at a P/E ratio of 17.59x (Sep16 estimates) with 6.2% EPS growth, price to sales ratio of 1.90x, and a price to book ratio of 2.13x. Mid single digit sales growth is likely to continue through the end of these fiscal year and throughout next year to $3.7B+ annually. In January, the company topped Q1 EPS and revenue estimates as subscribers grew at 13.4% to 262K. While the stock doesn’t exactly trade at a cheap valuation and does face a considerable amount of new competition coming to the market, a solid dividend yield (2.12%), share repurchase program, better than expected earnings, and a recent bullish analyst note (Oppenheimer upgrading ADT to buy with a $45 price target) make the stock or calls one to consider in the intermediate-term.

1. MRVL- Following yesterday’s buyer of 1,999 Apr 17 $17 calls for $0.30, someone came in this morning and purchased 5,635 of those same calls for $0.40 (yesterday’s trade took open interest up to 7,217 from 5,024 contracts). The call to put ratio was 90:1 and call activity was more than 3:1 (IV +3% to 31.73). Marvell Technology is a $8.4B semiconductor company trading at a P/E ratio of 16.54x (Jan16 estimates) and is even expected to see a slight decline in the top and bottom line this year. However, the recent M&A deal between NXP Semiconductors and Freescale Semiconductor has sparked interest with investors in the sector. (FSL) trades at a P/S ratio of 2.67x compared to Marvell’s 2.25x multiple. Last month, Barron’s speculated that an exit from their sluggish wireless business could give mean a nice pop in the stock (NVIDIA and Broadcom did the same).

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ADT MRVL unusual options activity