Call Options Surge in Demand for Burger King

BKC – Burger King Holdings, Inc. – Shares of the second-largest U.S. hamburger chain jumped 16.65% to an intraday high of $19.19 following reports the firm may be in advanced talks to put itself up for sale to investment firm, 3G Capital, or British private equity firm 3i Group Plc. The fast-food chain’s shares are currently up 14.8% at $18.88 as of 1:15 pm ET. Speculators were quick to take a bit out of BKC options right out of the gate this morning, and have exchanged just fewer than 50,000 contracts on the stock by 1:20 pm ET. Trading traffic is heaviest in the September and October contracts with investors exchanging approximately 5.5 calls on Burger King for each single put option in action thus far in the session. The surge in demand for options on BKC coupled with increased uncertainty regarding potential buyout offers lifted the stock’s overall reading of options implied volatility 23.2% to 52.31% this afternoon. Investors hoping to see the burger maker extend gains ahead of expiration in September picked up approximately 7,800 calls at the September $20 strike for an average premium of $0.42 each. Call buyers, should they choose to hold the positions through expiration, make money if the price of the underlying stock increases 6.4% over today’s high of $19.19 to exceed the average breakeven price of $20.42. The $20 strike price was also the most heavily populated one in the October contract with more than 11,650 calls changing hands there by 1:25 pm ET.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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