A month ago, I wrote a report saying to buy Assurant Inc. ($AIZ) because of the heavy volume in June call options during the week of May 14. Additionally, implied volatility of the options jumped from the low 20s to the low 40s over two days in mid-May.
With the stock closing at $95.49 this past Friday, the June 90, 92.5 and 95 calls were either exercised or sold, but the June 97.5 and the June 100 calls expired worthless.
Last week, there was significant buying of July call options, but the volatility remained in the low- to mid-30s, where it had settled since late May.
However, today, Tuesday, June 19, 2018, 2969 calls traded; this is the most calls bought in a single day in the past three years (I did not look back further). It is also significantly higher than the second highest amount of 1854 calls bought on May 15, which was part of the reasoning behind my original buy recommendation.
Not only was the call volume at record levels, but implied volatility spiked from 32% yesterday to 46% today, according to Bloomberg.
AIZ’s stock volume of 1.99 million shares today was the most in over two years since February 10, 2016, when the stock traded a little over 3 million shares with the stock dropping 13% related to earnings news. Further, based on a closing price of $99.60[i] today’s +4.6% stock return made AIZ the largest gainer in the S&P 500.
I suspect that there will be another large move upward in the next few days or weeks as the above factors point to pre-takeover activity.
[i] On Tuesday, June 19, at 17:00:00.021, time and sales showed a trade of 7599 shares at $95.23 with the condition “Extended Hours Trade, Avg Pr”. Some pricing sources, such as Yahoo Finance and CNBC are showing this ($95.23) as the last after-hours or regular closing price for AIZ. $95.23 was the prior day’s (Monday's) close and below the $99.60 close on Tuesday. Several prior other after-hours trades were at $99.60, leading me to believe that $99.60 should be considered the last trade, the same price as the “Market Center Closing Trade” on 52,421 shares.
Disclosure: I am/we are long AIZ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.