Follow Buyout Hunches
By David Enrich
The Wall Street Journal
Friday, March 17, 2006
The year is off to a speedy start on the
mergers-and-acquisitions front. Options traders seem to be
betting that more corporate takeovers are in the works.
Among the latest rumored targets:
Qwest Communications International Inc. and
LaBranche & Co.
A variety of Qwest options saw heavy trading yesterday, with
the company's April and July 7.5 calls especially active.
More than 7,200 of the April 7.5 calls changed hands,
compared with 8,271 previously outstanding, as their price
jumped to 35 cents from 10 cents. More than 2,000 of
Qwest's April 7.5 puts also were traded, compared with open
interest of 1,311. Their price was unchanged at 75 cents.
Yesterday's total call-trading volume of about 13,000
contracts was more than six times Wednesday's volume of
2,045 calls, according to Options Clearing Corp.
Meanwhile, shares of the Denver telephone company rose 3.2%
For the April 7.5 calls to become profitable at yesterday's
prices, Qwest shares would have to top $7.80 each by
mid-April. But Frederic Ruffy, an analyst at Optionetics,
said traders may simply be hoping to nab a quick profit if
the options gain value.
A number of observers attributed the brisk trading to fresh
market rumors that a telecommunications company, perhaps
Verizon Communications Inc., is poised to bid for
Qwest. The possibility of such a move has gained currency
this month since
AT&T Inc.'s agreement to buy
Meanwhile, LaBranche's May 15 calls were the subject of
unusually heavy trading. More than 1,000 of the contracts
changed hands, compared with open interest of 595. Their
price rose to 90 cents, up 20 cents. Implied volatility -- a
gauge of traders' expectations about future swings in
LaBranche's stock price -- surged 9%. The company's shares
closed yesterday at $14.14, down five cents.
One possible reason for the trading: LaBranche is an
oft-rumored takeover target. The firm is coming under
pressure as the NYSE embraces an electronic-trading system
that relies less on the specialists at the heart of
LaBranche's business model.
David Enrich at