Kraft Speculative Options Trades Going Farther Up On Strikes (KFT)

This morning we gave another heads-up volume spike alert on Kraft Foods Inc. (NYSE: KFT) as traders have been buying up call options after some non-directional high volume trades pulled more speculators into the fray.  What is interesting is that this high volume is entirely in August 2008 expiration options which have less than ten days until expiration.  To prove a point, the AUG08 $35.00 CALLS have a higher open interest than all other contracts combined in the options from September 2008 out to March 2009.

AUG08     Volume    OpInt.
$35.00         1,785    579,365
$37.50        61,389   208,434
$40.00       257,962   273,812

This started out on what appeared to an arbitrage trade, but has evolved into a trade with more speculation than mathematics.

Jon C. Ogg
August 6, 2008