Big Option Buy in Family Dollar Stores (FDO) Yesterday

In what could be a precursor to a higher buyout offer for Family Dollar Stores, there was a very large call buy in Family Dollar Stores (FDO) yestereday.

A trader seems to think (know?) that Family Dollar Stores (FDO) is going higher after their recent buyout offer by Dollar Tree.   The trader bought 4000FDO September $80 calls. They paid $0.65 at the ask, for those calls that expire in just a month and half or so.  That makes for a good sized bet with a transaction value of over $260,000.

Family Dollar Stores (FDO) is closed yesterday at $76.38 so this trader seems to think maybe Dollar General is indeed coming in with an offer as rumored earlier this week, maybe around $80.  FDO has a 52 week high of $79.93, and a low of $55.64 on the year.  Volume in trading accelerated near the close yesterday, indicating something may be coming.

We like this trade given it’s size, and the discussion this week about Dollar General considering a competing bid and while we missed the real time trade, we will attempt to get in on this this morning.  Twenty three analysts currently follow Family Dollar Stores (FDO).  The average rating on FDO is “hold” and the average price target is a staggering $65.43.  Analysts clearly missed the boat on this one!

A Family Dollar logo is seen on a shopping basket in ChicagoThe last analyst action was on July 29th, when Piper Jaffray upgraded its “underweight” rating to a Neutral rating and their price target increaesed from $50.00 to $75.00.  It’s clear none of these “smart” analysts saw the potential for consolidation in the dollar store industry, and were completely blind sided. Make you wonder what these monkeys were doing?

We look forward to the announcement on a bid by Dollar General, or a increase in the bid by Dollar Tree. Giddy Up.