Buyout Chatter Sparks Significant Call Volume on Akamai

03/23/2009 1:24 pm EST


Nick Perry

Equity Options Trader, Schaeffer's Investment Research

Calls were the option of choice Thursday on Akamai Technologies, Inc. (AKAM). Traders on the International Securities Exchange (ISE) yesterday bought 1,745 calls on the stock, compared to just 43 puts. In other words, bullish bets were nearly 41 times more popular than their bearish counterparts.

Looking back over the past 10 days worth of data from the ISE, AKAM has racked up a call/put ratio of 2.66. This ratio ranks higher than 75% of other such readings taken during the past year, highlighting investors' growing preference for calls over puts.

The rising call volume is no surprise, since AKAM has rallied 26.5% year-to-date. In the process, the equity has toppled former resistance from its ten- and 20-week moving averages, and the former of these trend lines has since switched roles to act as support.

Checking in with the company's most recent headlines, it looks like takeover speculation could also be driving bullish sentiment among option traders. Specifically, The Wall Street Journal reported Tuesday that AKAM could soon "find itself in the cross hairs" of a buyout bid.

In the article, S&P equity analyst Scott Kessler observed, "Akamai would make sense as an acquisition target for a number of (telecom) companies."

Whether or not an acquisition offer materializes during the short term, AKAM could extend its recent rally if analysts take note of its strong price action. Thomson Reuters reports that the equity's average 12-month price target is $20.05, less than one point above Thursday's closing price. Plus, Zacks notes that ten out of 20 brokerage firms maintain a lukewarm "hold" rating on the shares. Any upgrades or price-target boosts could draw more buying pressure to AKAM.

A current chart follows below:

By Nick Perry of Schaeffer’s Trading Floor Blog

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