Something funky happened in Unilever trading just before Kraft Heinz announced it attempted a takeover (UL, KHC)

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February 17, 2017 3:27 PM

The options trading on Unilever in the days before the announcement of a takeover approach by Kraft Heinz is raising eyebrows.

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On Friday, Kraft Heinz confirmed that it had approached Unilever about a $143 billion merger in what would be one of the largest M&A deals ever.

This followed a Financial Times post early on Friday breaking the news that Unilever had been approached to create one of the world's largest consumer-goods companies. Both Unilever and Kraft later confirmed that Unilever had rejected the offer.

Recent options trading in Unilever, however, has raised some eyebrows as a spike in upside bets started a few days before the deal was announced.

According to data collected by Bloomberg, 10,909 call options were traded on Wednesday, the most in any day since 2011.

Essentially, these are contracts that give an investor a right to buy Unilever stock at a specified price at a specified time. Call options are typically thought of as a bet the stock will go up, since a trader profits if the stock goes above the option price.

Put options — basically, the opposite bet on the stock falling — traded only 232 times on Wednesday.

On Wednesday, most of the calls bought were for $40 and $45 strike prices with the expiration date of March 17. According to the companies, Kraft offered $50 a share for Unilever, and the bets are already profitable as Unilever shares were up 10% near $47 on Friday.

The pattern wasn't confined to Wednesday; 5,186 call options traded on Thursday in the US versus just 31 put options.

Unilever closed at $42.57 a share on Thursday.

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