Options Trading Surges Ahead of Buyout Deal

Unusual buying activity of bullish options on Gillette Co. ahead of its pending purchase by Procter & Gamble Co. is raising eyebrows among some options market players.

Some traders appear to have won the jackpot on the first news of the planned merger of the consumer product giants, which trickled out Thursday evening.

Before the announcement, some lucky players appeared to have bought Gillette’s February call options, giving them the right to buy what is now a $51 stock for $45.

“The approximate 4,224 transactions in that options series gave them a combined tidy windfall of about $550 per contract, or a profit of $2.3 million, based upon Friday’s prices,” said Michael Schwartz, chief options strategist at Oppenheimer & Co.

Thursday’s “call volume was razor sharp, indicating some astute buying prior to the announcement,” Schwartz said.

The Securities and Exchange Commission declined to comment on the unusual volume.

A total of 6,062 contracts traded in Gillette across the U.S. options exchanges Thursday, up from the average daily volume of 1,658 contracts, according to McMillan Analysis Corp.

On Thursday, Gillette shares closed at $45.85 on the New York Stock Exchange.