HALISTER: Kimberly-Clark, Kellogg Options Show ‘Rampant’ M&A Bets: MKM

Kimberly-Clark, Kellogg Options Show ‘Rampant’ M&A Bets: MKM

(Bloomberg) -- Options trading in Kimberly-Clark and Kellogg show there is rampant M&A speculation after Kraft Heinz withdrew its bid for Unilever, MKM derivatives strategist Jim Strugger says.
  • A possible structure for speculative M&A deals is to use term structure to position long gamma while minimizing carry and capping downside risk
    • For KMB, it would mean selling July $120/$110 put spreads at $1.20 to buy April $140 calls for $1.70 and a net $0.50 debit
  • CL, GIS, CPB and STZ are also atop MKM’s events screen

Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
K US (Kellogg Co)
KMB US (Kimberly-Clark Corp)

People
Jim Strugger (MKM Partners LLC)

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