Options on Kraft Foods (KFT, news, chart) seeing ten times their usual volume by midday, with more than 80,000 each of the August 35 calls and puts trading in the form of ‘reversals’ or simple forward-like trades in which the calls are bought and puts are sold as a package against one share of stock for a transaction with no directional or volatility impact. Most of today’s volume traded for a net 7.5 cent debit with the initiator buying put and stock. Another 50,000 contract block traded just after noon, and this activity appears to be a play on Kraft’s spinnoff of Ralcorp.Ãƒâ€šÃ‚Â While the payment date of that event has not been announced, today’s flow suggests big money desiring to get long shares asÃƒâ€šÃ‚Â part of their approach to the Ãƒâ€šÃ‚Â complexÃƒâ€šÃ‚Â tender structure.
About the Author (Author Profile)
Henry Schwartz is the president of Trade Alert LLC, a provider of real-time options analysis tools to leading Wall Street firms. His systems analyze hundreds of thousands of transactions per second to help professionals identify and interpret market activity in real time, supporting informed trading decisions and intelligent idea generation. He has held institutional trading and management roles with Bank of America, Bear Stearns, Salomon Brothers and the Hull Group, and made markets on the CBOE and AMEX floors in the US, and EUREX and MONEP overseas. Prior to founding Trade Alert, he led the electronic market-making group at Bank of America coincident with the launch of the International Securities Exchange. He received his bachelor’s degree in Economics from the University of California, San Diego and his MBA from NYU’s Stern School of Business.