by David Russell
Buyers are swarming to YRC Worldwide after the debt-laden trucking company announced progress renegotiating its loans with creditors.
Options volume in the name surged to 52,497 contracts, 2 1/2 times the normal level in the name. Most of the activity came after management announced changes to loan covenants and CEO Bill Zolars said "we will have a long-term solution with our lenders in the very near term."
YRCW rose 9.56 percent to $4.47 in late morning trading, including a 9 percent jump immediately after the news was announced. The company also announced that its next earnings release will come out before the market opens on Oct. 30.
The most common options trade on the stock appears to have resulted from investors selling the October 5 calls against open interest and opening new positions in the November 5 strikes.
In the largest transaction, an investor paid a net $0.60, unloading 8,203 October calls for $0.25 while purchasing an equal number of November calls for $0.85. About 4,000 more contracts traded under the call rolling strategy, which provides investors with an extra month of long exposure.
YRCW has more than tripled in the last three months after trading at depressed levels amid bankruptcy fears. Some of the call buying may result from investors with a short position in the name looking to hedge against upside exposure. An elevated 30 percent of the company's float was sold short as of Sept. 10.
Call volume in the name exceeded puts by almost 6 to 1 today.
Disclosures: I own YRCW.