Renewed speculation that The New York Times Co. could be a takeover candidate fueled heavy buying of its bullish options as traders hoped to profit from a share rally, analysts said.
The New York Times Co., which also owns The Boston Globe and more than a dozen local newspapers, has been cited periodically as a potential acquisition target.
A company spokeswoman declined to comment. Times shares closed up 4.19 percent, or 96 cents, at $23.86 on the New York Stock Exchange.
"Renewed talk of a possible takeover of the Times has sparked interest in its stock and options," said Pete Najarian, co-founder of Web information site insideoptions.com.
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"The activity in the options market certainly grabbed attention as the talk swirled across trading desks on Wall Street throughout the day," Najarian said.
Several options market participants also noticed the unusual options activity.
"The NY Times options are active from LBO chatter," said Peter Dunay, investment strategist at Leeb Capital Management in New York. "The deal market has been active and these private equity groups are flush with cash not only spurring deals but spurring speculation of additional deals," he said.
Throughout the day, traders gravitated to the October and November contracts which give the right to buy the Times at $25 a share. Those trades would be profitable if shares of the Times rose above $25 by the third week of October or mid-November.
Late Thursday, a total of more than 8,500 calls and 2,957 puts changed hands in NYT, far outnumbering normal volume of 242 contracts, according to market research firm Track Data.
Investors often turn to equity calls, which give the right to buy the stock at a predetermined price within a specified time period, to speculate on anticipated price appreciation in the underlying shares. Puts convey the right to sell the stock.
Shares of the Times have fallen almost 11 percent since the beginning of the year.
"The entire sector has been under enormous pressure, newspapers' stock prices have languished for an extended period of time," said Darin Feldman, portfolio manager at Connecticut-based hedge fund Aladdin Capital.
Like other newspaper companies, the Times has been trying to adapt to a new generation of readers who get more news online while holding on to advertisers who are moving their buys elsewhere.
The company also is cutting costs. In September it said it would sell its broadcast media group, including nine television stations. In July it said it would shrink the width of its paper to save on newsprint costs, consolidate some of its printing facilities and cut 250 jobs.
"Management has reflected a contemporary view by restructuring assets over the last three months. The next step might be a partnership with Internet distribution possibilities," said Paul Foster, options strategist at financial information Web site theflyonthewall.com in Chicago.
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