Archer Daniels Midland Company
(NYSE:ADM) shares moved up $0.68, or 1.92%, to $36.18 this morning
after extraordinary call option volume fueled speculation that the
company could be the subject of a buyout. The focus was on the $40
calls expiring during the next few weeks as about 35,000 call options
changed hands compared to merely 5,800 puts.
Deutsche Bank
maintains a list of 25 potential takeover targets based on underlying
options activity. Among the targets are the obvious Alltel and Wendy's
International along with Sovereign Bancorp, Countrywide Financial, and
Gap Inc.
Now, call options purchasing doesn't necessarily mean
there isn't any substance to these rumors; rather, they are typically
used be traders to spread their bets across many potential
opportunities in hopes of a home run. Many investors, however,
incorrectly see the move actions based on insider knowledge - which can
happen, but is almost always not the case.
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