Jan. 18 (Bloomberg) -- Washington Mutual Inc. surged as much as 11 percent on the New York Stock Exchange as traders bet that the largest U.S. savings and loan will be acquired.

``The speculation is that they might get a bid'' from JPMorgan Chase & Co., said Rebecca Engmann Darst, an options analyst at Greenwich, Connecticut-based Interactive Brokers Group Inc. ``We saw the setup emerge earlier after Jamie Dimon said he would be open to acquisitions.''

Washington Mutual climbed $1.09, or 8.8 percent to $13.55. Earlier, the stock reached $13.83. The Seattle-based lender has tumbled 69 percent in the last year.

JPMorgan, the third-largest U.S. bank, and Washington Mutual are in ``very preliminary talks,'' CNBC reported Jan. 11. Richard Bove, an analyst at Punk Ziegel & Co. in Lutz, Florida, said last month that Washington Mutual was ``probably now a candidate for takeover'' and that JPMorgan was the only ``realistic'' buyer.

Dimon, chief executive officer of New York-based JPMorgan, said on a Jan. 16 conference call with analysts that he's ``open- minded'' about the possibility of acquiring other banks or assets, and the current market environment makes such a takeover more likely. Bank of America Corp., JPMorgan's bigger rival, agreed this month to buy Countrywide Financial Corp., the mortgage lender that tumbled 79 percent last year.

`On The Cheap'

``After the Bank of America deal, people are thinking that at these valuations there could be places to take some risk and pick up a company like this on the cheap,'' said Mike Capitani, head of equity trading at Caris & Co. in New York. ``It's been one that's been thrown around in the past, and it makes the rounds again like lots of the takeover rumors.''

Washington Mutual trades for 8.2 times profit, less than the 17.6 price-to-earnings ratio for members of the S&P 500.

``We do not comment on speculation or rumors,'' said Shane Winn, a Washington Mutual spokesman. JPMorgan's Joe Evangelisti declined to comment.

Options traders increased bets that Washington Mutual shares will rise. Contracts that give the right to buy the stock for $15 by Feb. 15 were the most-active calls, rising 29 percent to $1.10. The total number of calls traded rose to 58,164, more than twice the 20-day average.

``People are putting one and one together with JPMorgan possibly stepping in,'' said Adam Futterman, director of options sales and trading at WJB Capital Group in New York.

Washington Mutual yesterday reported its first quarterly loss since 1997 after writing down the value of its home mortgage unit and setting aside $1.5 billion to cover bad loans. The lender reported a loss in the fourth quarter of $1.87 billion, or $2.19 a share, compared with profit of $1.06 billion, or $1.10, a year earlier.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: January 18, 2008 16:23 EST