Call option action on Coach Inc. (COH) has exploded this afternoon, surely a sign that some inside information has leaked. First a single opening buyer hit the July $36 calls around 1pm, buying 7716 calls at the ask price of 25 cents. Now, as of 2pm a total of 27,407 July 36 calls have traded, and still counting .
The COH July $36 calls are now trading at $0.75 to $0.80, last at 77 cents, up a staggering 62 cents on the day. That initial trade at 25 cents has now tripled in value in about an hour, from $193,000 to almost $600,000. Not bad for an hours investment.
Meanwhile the common stock of Coach Inc. (COH) is only trading up 2.38%, up 82 cents to $35.10 on the day, on average at best share volume. Coach has a 52 week low of $33.60, and a high of almost $60.00. It’s P/E is currently at 10 times earnings. Based on this huge call volume spike, we’re guessing it’s leaked earnings data, or / and a yet to be announced upgrade from one or more major analysts.
Coach Inc. (COH) is expected to announce Q4 earnings on July 28, which doesn’t help these July options expiring on July 18. So based on that info, we think a big upgrade, or a buyout would be the more plausible explanation for this massive call buying.
A total of 37 analysts have an average rating of HOLD on Coach Inc. (COH), and price target of $36. They estimate that Q4 earnings will come in at 53 cents per share.
It will be an interesting couple of days for Coach Inc. (COH) options holders. We are going to sit on the sidelines on the options, but may pick up some common stock instead.
Here’s a snapshot of trading today in Coach Inc. (COH)