E*Trade Financial Rumors Swirl…Again

E*Trade Financial, (NASDAQ: ETFC) which is perennial takeover fodder, is again awash with rumors and speculation about a potential takeover by a rival financial services firm. These rumors seem to pop up every month or so, though this time the rumors may turn to reality given that Fred Romczyk, Ameritrade’s Chief Executive, said that he is considering such a takeover under the right circumstances.

E*Trade Financial call volume surged yesterday as the stock rallied over 9%. The Nov. and Dec. $2 call were very active and over 50,000 calls across all months traded yesterday. Being as these are only rumors and E*Trade is still saddled with the same mortgage book as six months ago, albeit moderately improved, I wouldn’t buy short term upside calls. If you want to play this, purchase the stock or sell the Apr 2010 1.50 put and buy the Apr 2010 2 call for even.