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*Option volume in TI surges on Tuesday
CHICAGO Customized Jerseys , June 7 - A large bet in Temple-InlandInc (TIN.N) call options almost two weeks before a rival madean unsolicited bid for the packaging company raised eyebrows onTuesday.
International Paper Co (IP.N) late on Monday offered $3.3billion for Temple-Inland.
In the options market Customized Jerseys , one select upside call tradeexpiring in January 2012 stood out. The trade took place on May25 and positions for a "huge rally in Temple-Inland shares,"said Interactive Brokers Group option analyst Caitlin Duffy.
The bullish investor paid a net premium of $1.10 percontract for a 6 Customized Jerseys ,425-lot January 2012 $25/$30 TIN call spreadwhen Temple-Inland shares were trading at $22.81, Duffy said.
The spread was tied to the sale of 150,000 shares tradingat $22.40, a common method to minimize initial market impact,said Trade Alert President Henry Schwartz.
The circumstances surrounding the trade may merely reflectspeculative bets. But the subsequent announcement of a bid byI-P raised questions about the timing of the trade.
"The trade does look suspicious based on timing and theunusual large size," Schwartz said. "But the use of the Januaryoptions suggests the buyer did not realize that a deal would beannounced so soon."
Duffy noted that call open interest at these strikesindicates the trader was still holding the position as of earlyTuesday.
"The run-up in the shares arrived far sooner than predictedby the spread," Duffy said. "The trade was well-timed but I donot have any evidence that it was suspect."
Temple-Inland has rejected the $30.60 per-share cash bid, a46 percent premium to its stock's closing price on Monday,saying it "grossly undervalues" its assets and raises antitrustconcerns. [ID:nN06277927].
The stock closed up 40.36 percent at $29.49 on the New YorkStock Exchange on Tuesday.
Total premium paid for the spread was just over $700uggs store however,000 atthe time of the trade and the maximum value for the spread is$3.2 million if the shares move above $30 by Januaryexpira