January 28, 2015 / 9:34 PM / 3 years ago

Advent Software options unusually active ahead of deal news

NEW YORK (Reuters) - Bullish activity in Advent Software Inc’s ADVS.O options surged weeks ahead of a report on Wednesday that U.S. financial software company SS&C Technologies Holdings Inc (SSNC.O) plans to buy Advent for about $2.3 billion.

San Francisco-based Advent Software’s shares jumped as much as 13 percent to an all-time high of $42.85 on Wednesday, after a Bloomberg report said SS&C plans to offer $45 per share for Advent. Reuters has not independently verified the information, and Advent could not be reached for comment. SS&C declined comment.

Trading in Advent’s shares has been unusually active over the last two weeks with average daily volume of over a million shares, nearly three times the average over the past 200 days.

The options market also shows increased activity, as trading in those options, usually sparse, picked up steam, suggesting to some traders that someone may have had knowledge of a possible deal.

“The activity in the options would lead me to believe somebody had some prior knowledge of what was going to take place,” Travis McGhee, vice president of optionMonster, said.

Open interest in the calls is at 5,919 contracts or more than 10 times the open interest three weeks ago, with the bulk of it concentrated at the $35 and $40 strikes expiring on Feb. 20, according to Thomson Reuters data.

“Over the previous 10 days, total options volume was 8,598 calls and 844 puts, a ratio of 10-to-1,” Fred Ruffy, options strategist at WhatsTrading.com. In December, the options averaged 10 contracts traded a day.

Calls betting on Advent’s shares rising to $35 and other calls banking on the shares touching $40 by Feb. 20 were the most actively traded options for the last two weeks.

The choice of the strikes and the fact that they were set to expire so soon makes the trades very aggressive, said McGhee.

“It appears that someone was doing the calculation on what the valuation of a potential acquisition could be and where the stock could run,” McGhee said.

Before Wednesday’s jump, Advent shares had risen 23 percent so far this year, leading to speculation about the company being an acquisition candidate.

In March 2013, the accounting software company hired Frank Quattrone’s investment bank Qatalyst Partners to explore a sale but after a review decided not to go ahead with a transaction.

Reporting by Saqib Iqbal Ahmed; Editing by Lisa Shumaker

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