Options Traders Getting Paid Following Buffett To Kraft Takeover
By Inyoung Hwang and Callie Bost
(Bloomberg) — Options traders had several companies to consider in trying to figure out what Warren Buffett would do next in the food industry. Overwhelmingly, they chose Kraft Foods Group Inc., and their bets are paying off.
Buffett?s plans were the subject of media and analyst speculation and there?s no evidence to ascribe illicit intent to anyone taking a flier on the deal. Data compiled by Bloomberg show that bullish options volume surged 85 percent in 2015 on Kraft, while falling in Kellogg Co. and Campbell Soup Co. On March 10, a block of 10,000 Kraft calls betting on an 8.6 percent jump to $67.50 by June 19 changed hands.
Kraft?s stock surged to a record Wednesday, and the trader of the March 10 calls made about $15 million as 3G Capital and Buffett?s Berkshire Hathaway Inc. said they are buying the company to merge it with H.J. Heinz Co. Speculators probably focused on the Philadelphia Cream Cheese owner because it had the most value to unlock, according to Joe Kunkle of OptionsHawk.com.
?Options traders have been placing their bets in the consumer-foods segment ever since it was reported 3G Capital was interested in a large deal,? said Kunkle, founder of the Boston-based provider of market data and analytics. ?Kraft was the name that saw the most consistent bullish options activity.?
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