Shares of Kate Spade (KATE) made a mid-day headline grabbing move as news came out saying the company was considering putting itself up for sale. A couple of things happened before the news that have people talking. The first was in the option market where a few minutes before the stock rallied there were a few very well timed call option purchases. The time and sales below highlights some of the bigger trades from today.
Data Source: LiveVol Pro
The buy of just under 2,000 KATE Jan 20th 16 Calls for 0.40 really got a lot of attention. However, there was a big buyer of the Jan 20th 12 Calls and 17 Calls as well before the stock took off.
When we get a big piece of news that moves a stock higher (or lower) during the day, I look at the option activity, but I also look to Twitter to see if any rumors were showing up in social media before the stock price move. Luckily CBOE has a strong relationship with Social Market Analytics (SMA) as we have created an index that tracks the performance of a strategy associated with one of SMA’s scoring methods.
SMA compiles various data with respect to quantifying Twitter sentiment. The stat that made the most sense to look into today was a metric that is referred to as an S-Score which quantifies real time sentiment. To simplify things, an S-Score over 2.00 indicates bullish sentiment is abounding with respect to a stock. Today the S-Score for shares of KATE moved over 2.00 after the option trading activity commenced, but before the stock reacted to the news. The chart below contains 1-minute S-Score and 1-minute KATE share price data from 11:10 am to noon Chicago time.
At 11:22 Chicago time buyers started to show up for call options based on shares of KATE. At 11:25 the S-Score for shares of KATE quickly moved over 2.00. Finally, at about 11:33, shares of KATE quickly rallied from the mid-14 level to over 17. There was a decent time gap between the option trade and the spike in S-Score before shares of KATE took off. Stated differently, an astute market observer watching option activity and/or a sentiment indicator like SMA’s S-Score would have had over 10 minutes to put on a position if they felt the option trades and move up in sentiment were a precursor to something bullish for shares of KATE.
If you want to learn more about Social Market Analytics and their various data offerings visits www.socialmarketanalytics.com
If you want to learn more about the index CBOE created in conjunction with SMA visit http://www.cboe.com/micro/smlc/