With the subprime mortgages pummeling them, E-Trade (ETFC) has imploded and is in dire need of a solution to their immediate problems. Evidently that solution is presenting itself as a buyer of the company, as E-Trade has reportedly hired investment banks to support it in making itself available to be acquired.
The resultant reponse was expected, as option traders made a bunch of calls Friday in anticipation of the company being bought. Potential suitors considering the possibility are Charles Schwab Corp. (SCHW) and TD Ameritrade Holding Corp. (AMTD).
It's not clear at this time if the entire company is up for sale or a portion of it.
Even with the probability of a sale, traders were implementing conservative calls, primarily in the $5 to $6 dollar range.
That in itself shows how much trouble E-Trade is in, as the call range shows nobody is thinking the company will command any type of premium.
The large number of writedowns and credit losses has resulted in a decrease of 76 percent in the share price so far this year.
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