Option posturing in Kraft Foods before Heinz

March 25, 2015 09:44 AM

Option traders were clearly not set-up for a more than 30% surge in shares of Kraft (Ticker: KRFT) following a deal to merge the company with Heinz (Ticker: HNZ) to create The Kraft Heinz Co. On Tuesday, shares in Kraft closed at $61.33. Established bullish positions expressed through call option open interest at out-of-the-money strikes with a range from 62.5 to 75 was just 55,000. The most heavily-trafficked strike price is the 67.5, of which 86% of the total open interest of 23,600 call options expire in June.

Notably, total option open interest at the 80.0 and 85.0 strikes straddling the pre-market trading price of $82.38, is a meager 370 contracts. September expiration call options at the 80.0 strike closed on Tuesday at just a nickel and traded up to 4.00/5.20 during the first 30 minutes of the trading session with shares in Kraft up 32.25% at $81.12 as of 9:50 am ET.

Chart shows scant call positioning above $80.0 ahead of deal

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.