Are Anheuser Busch Inbev SA (BUD) Shareholders Seeking Options Insurance?

Anheuser Busch Inbev SA (ADR) (BUD) puts have been popular ahead of today's Senate hearing on the SABMiller buyout

Dec 8, 2015 at 10:42 AM
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Anheuser Busch Inbev SA (ADR) (NYSE:BUD) is trading 0.2% lower at $128.62, as today the Senate Judiciary Committee's antitrust subcommittee will hold its hearing on the company's purchase of its biggest rival, SABMiller. Leading up to today, BUD puts have been flying off the shelves at an annual-high clip, suggesting option buyers are either betting on or hedging against a pullback.

Utah Senator Mike Lee, Republican chairman of the subcommittee, said the hearing will "examine the impact of the so-called 'beerhemoth' merger on consumers." Anheuser CEO Carlos Brito and other industry officials will testify. A key piece of today's hearing will also be Molson Coors Brewing Company's (NYSE:TAP) acquisition of SABMiller's 58% stake in MillerCoors as part of the deal. 

Anheuser Busch Inbev first
approached SABMiller with the deal in September. After much back and forth, the companies agreed on a $105.5 billion purchase price in early November.To address regulatory issues, AB InBev reported Friday that it would consider the sale of European-based premium beer brands Peroni and Grolsch.

Analysts seem to have faith in BUD's prospects -- all but one following the stock give it a "buy" rating or better, and HSBC raised its rating to "buy" early this morning. Plus, the 12-month consensus price target of $136.59 sits in never-before-seen territory.

Traders have been betting against BUD in recent weeks, however, as short interest has increased by nearly 65% over the last two reporting periods. While a mere 0.6% of the stock's total float is sold short, it would take more than three days to buy back these shares, at BUD's typical pace of trading.  

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day put/call volume ratio of 1.65 sits in the top percentile of comparable readings for the past year -- meaning traders have bought to open puts over calls at an annual-high clip during the past 10 weeks. However, considering Anheuser Busch Inbev SA (ADR) (NYSE:BUD) has gained roughly 14% in 2015, and just touched an all-time best of $130.07 late last month, some of those puts may have been bought by shareholders looking to lock in gains.

 

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