Pershing Square Options Traders Mixed On Universal Music Deal Talk

Pershing Square Tontine Holdings Ltd. PSTH gapped down over 10% Friday morning after the Wall Street Journal reported the Bill Ackman-backed special purpose acquisition company is in talks to merge with Universal Music Group and take it public.

Rumors had been circulating for months around Pershing Square’s target acquisition, with many traders hoping Ackman would land a deal with Stripe, a software as a service company.

The Pershing Square stock reaction to the news of a nearing deal with Universal indicates investors were displeased with the news, and by midday the stock was trading down over 13%.

Options trades are mixed, however, with some betting Pershing Square is headed lower and some believing the negative reaction is overblown.

Bullish Pershing Square options traders bet over $309,250 the stock could fly back toward $25, while bearish options traders bet over $532,090 lower prices are in the cards.

See Also: Bill Ackman SPAC Announces Universal Music Deal: Could Investors See A #1 Hit?

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The Bullish Pershing Square Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

At 9:34 a.m., Friday a trader executed a call sweep, near the ask, of 295 Pershing Square options with a strike price of $20 expiring on July 16. The trade represented a $73,750 bullish bet for which the trader paid $2.50 per option contract.

At 9:34 a.m., a trader executed a call sweep, near the ask, of 550 Pershing Square options with a strike price of $20 expiring on July 16. The trade represented a $137,500 bullish bet for which the trader paid $2.50 per option contract.

At 12:45 p.m., a trader executed a call sweep, near the ask, of 320 Pershing Square options with a strike price of $25 expiring on Sept. 17. The trade represented a $32,000 bullish bet for which the trader paid $1 per option contract.

At 1:08 p.m., a trader executed a call sweep, near the ask, of 200 Pershing Square options with a strike price of $20 expiring on Jan. 21, 2022. The trade represented a $66,000 bullish bet for which the trader paid $3.30 per option contract.

The Bearish Pershing Square Option Trades: At 12:39 p.m., a trader executed a put sweep, near the ask, of 457 Pershing Square options with a strike price of $22.50 expiring on June 18. The trade represented a $38,845 bearish bet for which the trader paid 85 cents per option contract.

At 12:50 p.m., a trader executed a put sweep, near the ask, of 1,461 Pershing Square options with a strike price of $25 expiring on June 18. The trade represented a $467,520 bearish bet for which the trader paid $3.20 per option contract.

At 1:06 p.m., a trader executed a put sweep, near the ask, of 245 Pershing Square options with a strike price of $22.50 expiring on June 18. The trade represented a $25,725 bearish bet for which the trader paid $1.05 per option contract.

PSTH Price Action: Pershing Square shares lost 11.94% Friday, closing at $22.06.