Houghton and Atkeson

Is Deere (DE) on the Hunt?

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There's speculation that Deere (DE) may buy AGCO Corp. (AG) for $37 per share; on the other hand, such a transaction may not happen any time soon -- if at all.

But option investors are willing to bet that something good is about to happen to AG, a manufacturer and distributor of agricultural equipment, before May expiration on May 16.

So far today, 27-times the normal option volume has traded in AG. More than 16,000 call contracts have traded, which is more than all of the open interest in all calls and puts for AG. Almost all of it is concentrated in the AG May 25 (AGEE) and 30 (AGEF) Calls.

AG is currently trading at a little more than $25 per share. For the 13,000 May 30 call contracts purchased to move in to the money, AG must rise at least 20% in the next three weeks -- and these traders seem to think that could happen.

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