General Mills Inc. climbed to the highest level since June and options traders boosted bullish wagers on speculation that the maker of Cheerios cereal and Progresso soup may be acquired by Nestle SA.
The shares climbed 0.8 percent to close at $38.21 in New York, while the most-active bullish options were May $39 calls, which accounted for almost half of all bullish trades. The shares have climbed 7.4 percent this year.
"The call volume isn't massive, but it's piqued some interest," said Jamie Lissette, founder of the Hammerstone Group, a Westport, Conn.-based operator of online discussion forums for investors. "There's been a lot consolidation in the food names recently, and people are thinking Nestle may come in and buy a large U.S. food company."
There is increased options volume today amid "unsubstantiated takeover rumors," according to a report from options strategists at Susquehanna Financial Group in Bala Cynwyd, Pa.
Tom Forsythe, a spokesman for Minneapolis-based General Mills, and Robin Tickle, a spokesman for Vevey, Switzerland-based Nestle, both declined to comment.
"The Nestle-for-General Mills chatter won't fade away," said Alec Levine, a strategist at Wallachbeth Capital LLC in New York. "It's been previously speculated that Nestle may be interested, and these options are a cheap way to play that possibility."
Calls give the right to buy a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.