Talecris Biotherapeutics Holdings (TLCR) isn’t a name that rolls easily off the tongue, but the options activity in this biotech has been interesting and let’s take a look at a possible trade in this name. A little background first: Spain’s Grifols SA has made a bid to acquire TLCR for $19 per share in cash plus .641 in Grifols non-voting shares. Based on the closing prices of both companies on June 4, before the deal was announced, it values TLCR at about $26. Shares are down 15 cents to $21.76 today and more than $4 below the takeout price. The spread reflects uncertainty because the deal is likely to get some regulatory scrutiny.
Yet, Cerberus Capital Management, a part owner of TLCR, has been aggressively pushing for a sale of the company and this deal seems to have a good chance of going through. Consequently, open interest in TLCR calls has been steadily building since the news was announced — see chart below.
However, rather than call buyers dominating the action in TLCR of late, it has been premium sellers — i.e. buy write traders. Today, for example, 2500 December 22.5 calls were sold at $1.10, or $1.80 over (shares bought at $21.80). In other words, buying shares at $21.80 and selling calls at $1.10 reduces the cost bases of TLCR to $20.70 and leaves upside to $22.50, or $1.80 and 9.7 percent. It also makes sense because it isn’t clear when the deal might close. If it closes after the December expiration, the upside can be greater — especially if the stock is taken out at the $26 per share range.
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.