Wachovia to acquire A.G. Edwards – Financial Sector Covered Calls

Wachovia Corporation (WB) will acquire the A.G. Edwards Inc. (AGE) brokerage in a deal set for execution later this year. The merger will create the nation’s second largest brokerage after Merrill Lynch (MER). The overall cash and stock value of the deal is estimated at $6.8 billion.

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As the second largest retail brokerage in the U.S., the new company will have $1.1 trillion in client assets and a network of nearly 15,000 financial advisors throughout the nation.

This acquisition follows several other high-profile acquisitions by the Charlotte, N.C.-based Wachovia including First Union, Prudential Securities and Golden West Financial.

“The long-term growth opportunities of the brokerage industry are extremely compelling to Wachovia, and we have long expressed our interest in growing this business both organically and through acquisition. This combination with A.G. Edwards, which is widely considered one of the most highly regarded remaining independent brokerage firms in the industry, will further enhance our scale and relevance.” said Ken Thompson, Wachovia’s chairman and chief executive, in a statement.

Wachovia Goes Green:
HSBC (HBC) announced its plans yesterday to spend $100 million on “green” initiatives in the next five years. Wachovia, not to be outdone by the announcement, stated it would build only “green” financial centers by the end of 2008.

The AP reported the bank would build at least 300 “green” branches as it expands into California and other markets. A green branch will earn the moniker by changing to more efficient lighting, low-flow toilets, bike racks and premier parking for low emission vehicles.

The AP also reported Mark LaLiberte, president of Building Knowledge Inc., a green-building consulting firm, as saying, “Green building isn’t about using bamboo floors and wearing Birkenstocks, It’s about really smart business.”

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Potential Trades: All of the following option trades have 52 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.

WB
WB – The Wachovia trade involves the July $55 call option and offers 2.2% downside protection and 3.1% potential profit if the stock is above the $55 strike price at the end of the option period.

Competitors for WB include: Bank of America Corp. (BAC), Citigroup Inc. (C), and SunTrust Banks Inc. (STI).
AGE
AGE – The A.G. Edwards trade involves the July $80 call option and offers 1.6% downside protection and 5.3% potential profit if the stock is above the $80 strike price at the end of the option period.

Competitors for AGE include: Merrill Lynch & Co. Inc. (MER), The Jones Financial Companies, L.L.L.P. (private), and UBS Financial Services Inc. (private).
AMTD
AMTD – The Ameritrade trade involves the July $20 call option and offers 6.6% downside protection and 8.4% potential profit if the stock is above the $20 strike price at the end of the option period.

Competitors for AMTD include: Charles Schwab Corp. (SCHW), E*TRADE Financial Corp. (ETFC), and FMR Corp. (private).
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