Bloomberg News

General Mills Options Bet Yesterday Gains Fivefold on Forecast

February 17, 2012

Feb. 17 (Bloomberg) -- A block of 5,000 General Mills Inc. puts that traded yesterday rose 478 percent after the maker of Cheerios cereal and Yoplait yogurt cut its earnings forecast about 16 hours later.

The February $40 puts, which expire today, changed hands at 20 cents at 3:12 p.m. New York time yesterday in a block with volume almost triple the four-week average for bearish contracts, data compiled by Bloomberg show. They rose to $1.56 today for the biggest gain among General Mills options. The contracts traded on the ask price and exceeded the 1,137 outstanding contracts at the time, indicating it was a new bearish position.

“Everything points to someone having knowledge that this news was coming,” said Joe Kunkle, founder of OptionsHawk.com, a Boston-based provider of options-market analytics. “There was no expected news and they just happened to come out today with a profit warning, and it was a day before expiration.”

Tom Forsythe, a spokesman for the Minneapolis-based company, didn’t immediately return a call seeking comment. John Nester, a spokesman for the U.S. Securities and Exchange Commission, declined to comment.

General Mills headed for its biggest loss since March 2009, tumbling 3.8 percent to $38.26 at 3:37 p.m. New York time after cutting its profit forecast amid weaker demand and rising costs. Profit for 2012 will be $2.53 a share to $2.55 a share, the company said in a statement. General Mills is scheduled to report quarterly results March 21.

--With assistance from Cecile Vannucci in New York and David Welch in Detroit. Editors: Joanna Ossinger, Nick Baker

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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