UPDATE 1-Cheesecake Factory shares surge on Peltz interest

(Adds Cheesecake statement, updates share, option action)

CHICAGO, Dec 19 (Reuters) - Shares of Cheesecake Factory Inc (CAKE.O) rose over 10 percent on Wednesday and its options volume surged, after a fund controlled by activist investor Nelson Peltz received antitrust approval for an unspecified transaction related to the restaurant chain.

The Federal Trade Commission announced on Wednesday that U.S. antitrust regulators approved Trian Star Trust's transaction, but did not give further details. FTC officials could not be reached for comment.

Cheesecake said in a statement: "We strive to have an open dialogue with our shareholders and look forward to talking with Trian in that regard. We have had a preliminary conversation with Trian already, and look forward to continuing this dialogue."

A spokeswoman for Peltz could not be reached.

"Usually antitrust approval involves stock purchases or mergers," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York. "There is speculation that Peltz could be doing something with Cheesecake."

Peltz, who controls Arby's parent Triarc Cos Inc TRY.N, in recent years has pressed for changes at several food and restaurant companies, including Wendy's International Inc (WEN.N), H.J. Heinz Co (HNZ.N) and Kraft Foods Inc (KFT.N). Triarc has offered to buy Wendy's, the No. 3 U.S. hamburger chain.

Cheesecake shares were up $2.33 or 10.51 percent to $24.50 in afternoon trade after peaking at $24.55 on the New York Stock Exchange.

Options traders reacted as well. Roughly 20,000 contracts traded in Cheesecake in the market session, more than 26 times the normal volume level, and more than three calls traded for every put, according to market research firm Trade Alert.

Investors often turn to equity calls hoping to profit from further strength in a stock and puts to bet on potential share weakness.

"This option action is notable because Cheesecake's peer Darden Restaurants Inc (DRI.N) reported disappointing earnings on Wednesday and analysts' consensus appears to favor an outlook for subdued consumer spending in casual dining for 2008," said Rebecca Engmann Darst, equity options analyst at Interactive Brokers Group.

The catalyst for Cheesecake's bullish option flow, Darst said, appears to be that Peltz's fund has received FTC approval for a transaction which the market is interpreting as a sizable share purchase in the restaurant chain.

Among the most popular Cheesecake call options are the January contracts, allowing investors to buy Cheesecake shares at $25 apiece. Most of the overall call volume is focused on those contracts, for which buyers paid about $1 a contract, Darst said.

Prior to Wednesday, a look at the total options contracts outstanding in Cheesecake showed 2.6 open put positions for every call.

"This indicates that going into today, the sentiment in Cheesecake was very defensive. The mood changed significantly with today's option volume," Darst said.