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Pitney Bowes (PBI)
November 12, 2008Dear Fellow Options Traders,
Pitney Bowes Inc. (PBI) sells mail processing equipment and supplies. But, what it really does is borrow lots of money.
Long-term debt per share, net of cash reported in the last quarter, exceeded $18 per share for a stock trading at about $24. As we know, it is getting harder and harder to find lenders and when they do lend, rates are high and going higher.
Yesterday, option investors bought more than 2,000 of the PBI Nov 25 Puts (PBIWE). Although the company has recently missed earnings and put option volume is rising substantially lately, the stock has held up relatively well in the past couple of days.
What is most amazing about PBI is that the volatility on the options is about half the implied volatility of the S&P 500. On a relative basis, this is really inexpensive. To take advantage of this great trade setup, we recommend buying the PBI Dec 22.50 Puts (PBIXX) up to $1.45, as they give us almost until year-end to let this investment opportunity mature.
Have a great day trading.
Nick Atkeson and Andrew Houghton
