MGA – Magna International, Inc. – The most diversified automotive supplier in the world has experienced a share price rally of around 2.5% to $34.58. Word on the street is that Magna may be most at risk for billions of dollars in lost payments should General Motors or Chrysler end up bankrupt. Perhaps shares have climbed slightly today as investors feel that the automotive behemoths and the U.S. government will work to protect the interests of parts suppliers such as Magna International. Chrysler, on whom MGA is most reliant, has until April 30th to cut costs sufficiently or to restructure in court-protected bankruptcy. MGA and other parts makers have been negotiating for better contract terms and looking into securing payment guarantees through a government-aid program. MGA popped onto our ‘hot by options volume’ market scanner after investors scooped up downside protection on the stock, fearing the worst for the company ahead of the April 30th deadline. At the June 30 strike price approximately 10,300 puts were purchased for an average premium of 2.33 per contract. The put options will begin to yield profits to the downside beginning at a breakeven share price of $27.67. Option implied volatility has risen to the current reading of 72% from the value recorded at the start of this week of 66%. The more than 13,300 lots actively traded throughout today have surpasses the existing open interest on the stock of 12,753 contracts.
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