Wednesday is going to be quite a day in the airline sector.
The Wall Street Journal reports that AirTran (AAI) has made a $200 mln offer for Midwest Air Group (MEH), a 24% premium to yesterday's closing price. I throw this transaction out first, because there are some solid numbers to mention.
The far bigger enchilada that the Journal is reporting, through sources it hasn't named, is that United parent UAL (UAUA) and Continental (CAL) may be getting the urge to merge and have been holding "exploratory" talks! Terms at this point are not known and no deal is assured. The Journal reports that UAL has also contacted Delta (DALRQ) about a possible deal "to keep its options open", which could scuttle USAIR's (LCC) hostile takeover effort of Delta.
We've been watching options swing back and forth in UAUA and CAL this week and were aware of the investor conference that UAUA was holding today, but stayed away given the closeness of expiration. In the CAL options chain, speculation in the December calls went no further than the Dec45s today. In the January's some folks went fishing today out into the January60 strike where 40 changed hands; no doubt a small time player since they traded at mid-.15. 100 Jan55 CAL calls also traded today; again, small time lottery ticket fishing.
While speculators have been bouncing in and out of the CAL and UAUA options, almost nothing has been happening with the MEH options.. almost no open interest there either. So lightning is going to strike there tomorrow morning with very little options paper written.