Option activity bubbles over in Anheuser-Busch

CHICAGO (Reuters) - Option activity in Anheuser-Busch Cos Inc was notably bullish on Friday as traders snapped up calls, hoping to catch a share price rally on speculation the largest U.S. brewer would be acquired.

After reports that Belgian brewer InBev NV, the world's second-biggest by volume, was working on a $46 billion offer for Anheuser-Busch, the number of call options rose to roughly 247,000 contracts, nine times the normal turnover, according to option analytics firm Trade Alert.

An equity call option gives the buyer a chance to profit on a stock when the share price rises.

InBev, Anheuser both declined comment.

The prospect of a merger sparked a sharp rise in the shares of the brewer of Budweiser beer, which ended 7.7 percent higher at $56.61.

Many investors bought calls, betting on possible share gains in Anheuser early next week, which might occur if an announcement happens over that weekend, while others booked profits on their bullish positions.

U.S. financial markets are closed on Monday for the U.S. Memorial Day holiday.

"Given that many acquisitions have been announced during or just after weekends and the fact that European markets will be open on Monday, traders do not want to miss on a potential opportunity," said Scott Fullman, director of derivative investment strategy at New York-based broker-dealer WJB Capital Group.

Most of the call action was centered around the $55 and $60 strike prices in the June contract and went out as far as the September contract.

As the stock rose, many option traders took the opportunity to cash in. Calls in the brewer had been unusually active as talk of a possible deal by InBev heated up in the past week and surfaced several times before.

"Profit taking is one reason for the selling because there has been steady accumulation in Anheuser-Busch calls during the past week on takeover speculation," said independent options trader Frederic Ruffy.

Ruffy said some investors also appeared to be closing out positions in June contracts, banking profits, and rolling them forward to later months.

"The fact that so many traders are still buying calls going into Memorial Day weekend suggests they believe an announcement may take place over the weekend," said Mark Longo, founder of Web option information site www.TheOptionsInsider.com.

(Editing by Leslie Gevirtz)