Dow Jones options trading jumps before Murdoch bid

NEW YORK, May 2 (Reuters) An unusual spike in options trading on Dow Jones&Co. Inc. shares ahead of News Corp.'ssurprise takeover offer for the Wall Street Journal's publisher is raising eyebrows among options players.

The surge in volume in Dow Jones June and September calls as late as Monday suggests to some options analysts that someone may have caught wind that an offer was in the works, but wasn't exactly certain about its timing.

''It looks like there was some buying yesterday, (suggesting they) knew there was going to be a deal, but didn't know when because they didn't buy the May options. They bought June and September's,'' said Michael Schwartz, chief options strategist at Oppenheimer&Co. Inc. in New York.

On Monday, the September 45 calls traded 3,464 contracts in a range of 30 cents to 35 cents, while 641 of the June 40s traded at 25 cents, according to Schwartz.

Typical daily average March volume in Dow Jones calls is about 85 contracts.

Whoever bought these calls scored a substantial windfall come Tuesday's news, according to Schwartz.

Dow Jones stock leaped nearly 61 percent when CNBC reported that Rupert Murdoch's News Corp. offered to buy Dow for per share and had submitted an offer letter to the Bancroft family, the controlling shareholder group, as long as two weeks ago. The stock hit a session high at .47 on the New York Stock Exchange in Tuesday's session.

Dow Jones options also jumped, but far more spectacularly.

The September 45s rocketed 3,271 percent to .10 from Monday's close of 35 cents. The June 40s, meanwhile, surged 5,300 percent to .20 after ending Monday's session at 30 cents.

News Corp., which made the offer a few days ahead of Dow Jones' April 18 annual shareholders meeting, called the proposal a ''friendly'' offer.

AHEAD OF THE NEWS ''The implication here is that (some people) probably got some idea that there was (an offer) letter around,'' Schwartz said.

''Because of the unusual move in the stock and the volume before the announcement, it's mostly likely that the regulators will be looking at this.'' An SEC spokesman declined to comment.

Volume in the September 24 calls had been ''zero'' in the month before the offer became public, Schwartz added.

Jon Najarian, co-founder of optionmonster.com, a Web information site in Chicago, said April 25 and April 30 appeared to be the two dates with ''very suspicious trades'' and the moments leading up to the first public announcement of the offer.

''When people have tomorrow's newspaper today, they are tempted to act on it and that's what it looks like they did here,'' he said.

Dow Jones had been among the stocks with the lowest options volume, trading an average daily volume of 130 calls per day in January, just 121 per day in February and an anemic 85 contracts per day during the month of March, according to Najarian.

If successful, the estimated billion deal, which Dow Jones confirmed earlier, would make News Corp.'s Rupert Murdoch a major player in the global financial news business.

News Corp. said it would acquire all of the outstanding shares of Dow Jones for per share in cash, or in a combination of cash and stock.

REUTERS DH BST0435