Data shows surge in call options trading before Heinz announcement

Data shows surge in call options trading before Heinz announcement

The US Securities and Exchange Commission is reportedly looking at a surge in options trading in the hours before Heinz announced it had agreed to a US$28bn takeover bid.

The New York Times said today (15 February) the SEC had opened an inquiry into possible insider trading ahead of news of Heinz's deal with Berkshire Hathaway and 3G Capital.

Trading in Heinz call options jumped to the highest level since 31 January, according to Bloomberg.

Call options allow traders to buy the underyling shares and make a profit when the stock climbs. Shares in Heinz closed up 20% after the Berkshire/3G deal was announced yesterday.

The Financial Times, citing data from New York analysis firm Trade Alert, said 3,400 call option contracts were exchanged on Wednesday. Over 2,260 of those gave the trade the right to buy Heinz shares at $65. Shares in Heinz closed at $72.50 yesterday.

Bloomberg, quoting an unnamed source, said the review was in its initial stages. A formal investigation may not be opened, it reported.

When contacted by just-food, a spokesperson for the SEC declined to comment. "We can neither deny nor confirm the existence or non-existence of any investigations," she said.