Gap Call Trades Jump on M&A Speculation Denied by H&M

The operator of Sweden’s H&M clothing chain said there was “no basis” to speculation it would bid for Gap Inc. (GPS) after bets on a potential takeover lifted the apparel chain’s call-options volume to a seven-month high.

Almost 49,000 calls to buy the stock changed hands as of 12:05 p.m. in New York, 21 times the full-day average during the past four weeks and 11 times the number of puts to sell. The shares rose as much as 3.5 percent to $23.73, the highest intraday level in a year. The most-active contracts were May $25 calls, which jumped 109 percent to 23 cents for the biggest gain among all Gap options and accounted for almost a third of call volume.

Traders are betting that H&M’s Stockholm-based parent, Hennes & Mauritz AB (HMB), may bid for the largest U.S. apparel chain, said Jamie Lissette, founder of Hammerstone Group, a Westport, Connecticut-based operator of online discussion forums for investors.

“I can say there’s no basis for this rumor,” said Haacan Andersson, an H&M spokesman. Louise Callagy, a spokeswoman for Gap, said the San Francisco-based company doesn’t comment on rumors or speculation.

Gap’s May $25 calls were today’s 11th most-active contracts on all U.S. options exchanges, according to data compiled by Bloomberg. The option had an open interest of 34 outstanding contracts before today.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Matthew Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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