Showing that not only do old takeover rumors not die, but they don't even have the courtesy to fade away, the implied volatility levels for companies that have lately been the subject of takeover speculation continued on the high side Wednesday.
Typically, that is a sign that professional traders are concerned that some long-rumored deals may be heading toward reality. Some of the names that have made the rounds lately as takeover targets are
, and each continues to see high volatility levels, according to some options analysts. (Implied volatility is the annualized measure of how much the market thinks a stock or index can potentially move and is a critical factor in an option's price. It trends higher if the market thinks a deal is imminent because of the fluctuations M&A activity causes.)
Kellogg, the Battle Creek, Mich., cereal company, has been the subject of hot-and-heavy takeover talk lately. Paul Foster of
in Chicago, pointed out that implied volatility on Kellogg has perked up to the low-50s for August options, compared to implied volatility readings in the mid-40s last week.
, in a note Wednesday, pointed out that volume and implied volatility were higher than normal on Kellogg for Monday's shortened trading session ahead of the Independence Day holiday. On Monday, Kellogg options volume totaled 1,849 contracts, all of them
call options, McMillan noted. Average daily volume on Kellogg is 554 contracts, according to McMillan.
Shares of Kellogg, which snapped, crackled and popped some last week, were off 7/16 to 30 5/16 at midday Wednesday.
As for options action on Kellogg, 100 of the August 30 calls changed hands on the
American Stock Exchange, making it the most active Kellogg option. The calls were up 7/16 ($43.75) to 2 1/2 ($250).
As for Ryder, the company has been the subject of takeover talk off-and-on for some time. Implied volatility was about 85 for the August 17 options, Foster said, noting that the level was still robust compared with the typical measure on the stock. Ryder was down 3/16 to 19 3/16. The August 17 1/2 puts were active, with a little more than 300 contracts trading. The puts were up 5/16 ($31.25) to 1 13/16 ($181.25).
Ryder also made McMillan's volume list for the trading in its options Monday. McMillan pointed out that 4,678 options contracts traded (4,476 of which were calls) compared with average daily volume of 1,126 contracts.
Budget implied volatility was in the 120 range for the August 5 calls, Foster said. On Wednesday, 100 of the August 5 calls changed hands. The calls traded up 1/16 ($6.25) to 7/16 ($43.75). Budget has been the subject of takeover speculation lately. Foster noted that the volume of options trading on Budget was well above average on no news. Average volume on Budget options is 25 contracts, he said.
Continuing to expand its options market making presence,
Knight Financial Products
, a unit of
, announced Wednesday that it has acquired a specialist post on the
, in a
story last week, reported that Knight was looking to make a move on the Pacific Exchange. With the Pacific Exchange acquisition, Knight now has a presence on all five U.S. options exchanges. Knight said it plans to start trading from the post within the next 60 days, pending Pacific Exchange approval.
Terms of the deal were not disclosed, but Kovell's post is one of the Pacific's jewels. The firm is the lead marketmaker in
, to name a few, on the Pacific Exchange.
In the announcement, Robert Kovell, managing member of
, said the firm will now "focus on proprietary trading, options and electronic trading."
Options volume at the
Chicago Board Options Exchange
in June totaled 24.4 million contracts, up 30% from the year-ago period. The June volume figure is down 5% from May's 25.7 million contracts. Equity option volume totaled 21.3 million contracts, up 49% from the year-ago period, but down 1.8% from May.
options were busiest, with average daily volume of 40,235 contracts. America Online options average daily volume totaled 31,590, while
average daily volume totaled 30,237.