Bullish on Jack in the Box

Includes: CKR, JACK
by: optionMONSTER

By David Russell

Jack in the Box (NASDAQ:JACK) is leaping after rival CKE Restaurants (CKE) agreed to a buyout, prompting a large put trade.

JACK Chart

optionMONSTER's tracking systems detected the purchase of 1,960 June 22.50 puts for $2.06, matched against the sale of an equal number of June 25 puts for $4.06. Volume was below open interest in the June contracts but not September, suggesting a short position was rolled forward by three months.

JACK is up 4.48 percent to $21.24 in late morning trading and is up about 7 percent in the last month. The fast-food stock rallied as high as $28 in early June, and then retreated all the way to $18. It gapped lower on weak forecasts after its last two earnings reports.

Today's options trade generated a net credit of $2 and reflects confidence the shares will continue to push higher. It appeared after private equity firm THL agreed to pay $11.05 a share for CKR, which owns the Hardee's and Carl's Jr. chains.

Overall options volume in JACK is six times greater than average so far today, with the put sale accounting for almost all the activity.

(Chart courtesy of tradeMONSTER)