Time to Pork up?
The SPX managed to close at an all-time high yesterday. That makes investors happy with the 401k’s jumping to show some rosy balances. The news that brought us here was nothing special. Maybe the impetus was no bad news. Stocks are in new territory and the drop in volatility seems to confirm the rally.
That story will get plenty of ink today. Another story that is getting some ink is the Pinnacle Foods takeover by Hillshire Brands. Jimmy Dean is going shopping and spending a few billion on new brand names. For many companies it is easier to buy than build so adding more to the Hillshire stable makes some sense.
The market did not like the news and it sent HSH down to the low $34 range. By the end of the day HSH was trading just a shade under $36. If you look at the unusual activity view there were big buyers of the HSH Oct 38 calls at one point during the day. There were mostly buyers all day long in many of the just OTM strikes.
A month or so ago FB traded up on a 19 billion dollar acquisition of a modestly profitable messaging service which was not the case with HSH. The intensity of the call buying in HSH means the selloff was probably overcooked. Buying ITM call spreads at least out to the Jun cycle, like the 35/38, would be a nice way to trade the bounce.
OptionVision™ – data from ORATS
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