Mercantile Traders Look Up -- and Keep Hoping

Today's plays show a potential pop for the St. Louis bank.

Author:: Gregg Wirth
Publish date:: Mar 9, 1999 12:57 PM EST

Mercantile Bancorp

, the St. Louis regional bank that's become a favorite of M&A players, was seeing some speculative call-buying today, leading some options strategists to think takeover yet again.

In the past, Mercantile has been labeled a prime takeover target. It would fit the needs of several super-regional banks, such as

U.S. Bancorp

(USB) - Get Report

Bank One

(ONE) - Get Report

, which may consider buying the bank, according to Paul Foster, options strategist for

1010 Wall Street

"We're seeing a lot of call-bidders this morning," Foster said. Mercantile's stock was up 2 3/8 to 48 11/16 halfway through today's session.

Call traffic in Mercantile options was heaviest in the out-of-the-money April 50s, with 1,531 contracts trading against open interest of just 145. More important, the price of the April 50s jumped about 255% to 2, or $200 per contract. Before today, the most recent trade in the strike was 9/16, or $56.25 per contract. Both the out-of-the-money aspect and the spike in the price indicate a speculative bent to the action, traders said.

Mercantile's March 50s and June 50s calls traded 721 and 266 contracts, respectively. Although the open interest was higher in those calls, the prices there also saw significant spikes.

Mercantile, a bank with $36 billion in assets, has more than 500 offices in six Midwestern and Southern states. Yesterday,

Standard & Poor's

upgraded the company's outlook to positive from stable. In early December, similar trading patterns emerged and led many to think a deal for Mercantile was in the offing.

Besides takeover speculation, call-buyers were greasing the skids for a continued rebound in oil and oil-services stocks.

Halliburton

(HAL) - Get Report

, for example, saw its April 30 and 35 calls move 2,203 and 2,415 contracts, respectively, even as the company's stock slid 7/16 to 32 3/16 at midday.

More than 1,955 of

Enron's

(ENE)

July 55 calls traded against open interest of only 178 contracts, indicating capital staking out a new position. The contracts traded at 13 1/8 ($1,312.50), after climbing 2 3/8 ($237.50). Enron's stock was 67 1/4, up 9/16 this afternoon.

"Oil prices themselves have been up, and I think some investors are just trying to make hay while the sun shines," said Scott Fullman, chief options strategist at

Swiss American Securities

Overall equity options trading rose almost 20% in February compared with the same period in 1998, according to the

Options Industry Council

About 27 million options contracts changed hands in February, representing call or put commitments on almost 3 billion shares of stock. Open interest contracts in February reached a high of more than 33 million contracts.

The OIC represents all four major options exchanges and

The Options Clearing Corp.

Wade Cook, guru of the option-trading seminar set, became the latest corporate entity to sue online-message posters for defaming his company,

Wade Cook Financial

(WADE:OTC BB).

The company filed a lawsuit yesterday in

U.S. District Court

against 10 "John Does" -- unknown online posters who had been attacking Cook and his company on the

Yahoo!

message boards. Several other companies have sought

similar lawsuits against anonymous posters, often in order to discover the posters' real identities.

Cook's lawsuit claims that the information published by these anonymous message posters "negatively impacts the integrity of Wade Cook Financial and its chairman and discredits their business methods," according to a statement from the company.

Several state securities regulators and law enforcement officials are investigating Cook and the sales techniques used to promote his seminar business.