Energizer (NYSE: ENR), the famous battery company that competes with Procter & Gamble (NYSE: PG), reported Q2 earnings earlier today. According to this source, the results beat expectations on an adjusted basis. Energizer earned $1.12 per share. Analysts thought the business would do three pennies less.

Revenues, however, didn't fare so well. They fell 7%. Not only did the economy affect sales, but the dreaded currency-translation phantom that has been haunting the top lines of all businesses that are exposed to international transactions made its dreaded appearance on Energizer's earnings report. A conservative stance on the part of retailers and their inventory levels was also mentioned as a negative driver for sales in the release.

When I saw the headlines Energizer (NYSE: ENR) buys Playtex (NYSE: PYX), I immediately thought that the late night talk shows are going to have fun with this one. I could see Saturday Night Live writers really putting together an interesting skit involving a very moody bunny. But back to the news...

Energizer made an offer to buy Playtex, and shares of Playtex rose $2.79 (15.9%) to close at $17.97. But then I was curious to look at the option trading on Playtex. Insider trading has been running rampant recently and it is very easy to spot in the options market.

If you look at the option volume on the August 15 Calls (PYX HC) there is an interesting history. There were no options traded for three weeks, then on Tuesday, 51 traded. That is not unusual. Then on Wednesday, there were 5,488 options traded for a high price of $1.00 a piece. That is unusual. Today there were 4,649 options traded for a more than $2.95 a piece. This is just too good of timing to be coincidental. I mean I believe in good luck as much as the next guy, but this certainly appears that someone managed to beat the Friday the 13th curse today.

Now there is a small chance that when the Playtex president DeFeo canceled his speaking engagement on Wednesday, some observers got wind of something as the shares jumped mid-day; but it appears someone got wind that the buyout was coming and decided to make a little bet.

That bet proved to be profitable as $548,800 invested turned into $1,618,960 over the course of three days. Tripling your money over the course of three days is not a bad investment and the way the SEC has been laxly enforcing stuff recently, maybe they will get away with it.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You To Dump A Stock.

Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Energizer (NYSE: ENR), the battery and razor company, is buying Playtex (NYSE: PYX), the sunscreen and feminine care product company, for a bit less than $1.2 billion plus debt. The purchase price is about 18% above where Playtex was trading.

Reuters quotes the head of Energizer as saying: "We see Playtex as an exceptionally great fit with Energizer, with similar customers and distribution channels in the U.S. and Canada, and the opportunity for geographic expansion."

M&A transactions are obviously on the rise, but what a battery company would want a feminine care products operation seems a bit hard to explain. Distribution channel duplication may save some money, but it would seem to end there.

Playtex also looks expensive. The company is at a 52-week high, almost $16 up from well under $10 last July. And Energizer is paying a substantial premium. Perhaps it can afford to -- its shares are up 90% over the last year.

No matter how investors look at the merger, it is an odd combination.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Microsoft (NASDAQ: MSFT) July straddle in line with previous levels prior to EPS. MSFT is expected to report EPS of $0.31 according to Thomson Financial on July 19. MSFT announced a $1.15 billion charge last week related to an Xbox design flaw. MSFT July straddle is priced at $1.14. MSFT August option implied volatility of 23 is near its 26-week average according to Track Data, suggesting non-directional risk.

Playtex (NYSE: PYX) options active prior to ENR paying $18.30 per share cash. PYX agreed to be sold to Energizer (NYSE: ENR) for $18.30 a share in cash plus the assumption of PYX debt. The total enterprise value is $1.9 billion. PYX option volume was heavy prior to the announcement of ENR buying PYX. A total of 7,299 PYX contracts traded on 7/11, 4,208 contracts traded on 7/12; above its approximate one month average of 245 contracts a day. PYX overall option implied volatility of 37 was near its 26-week average of 35 according to Track Data, suggesting non-directional risk.

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: Strattec Security Corp (STRT), Palm, Inc (PALM), Netflix, inc (NFLX), J.C. Penney Co, Inc (JCP) and Marriott International Inc (MAR) were some of today's noteworthy upgrades:

• Baird upgraded shares of Strattec Security Corp (NASDAQ: STRT) to Neutral from Underperform following its Q3 report.

• Shares of Palm, Inc (NASDAQ: PALM) were raised to Equal Weight from Underweight at Lehman Bros.

• Banc of America upgraded Netflix Inc (NASDAQ: NFLX) to Neutral from Sell based on valuation.

• J.C. Penney Co Inc (NYSE: JCP) was raised to Strong Buy from Accumulate with a $105 target at Buckingham, citing strategic merchandise, flow and cycle-timing initiatives.

• Wachovia believes that as the lodging cycle matures, Marriott International's (NYSE: MAR) diversified fee-based, unit-driven model will outperform relative to pure hotel-owned companies, and upgraded shares to Outperform from Market Perform.

OTHER UPGRADES:

• Goldman Sachs upgraded CNOOC Ltd (NYSE: CEO) to Buy from Neutral.

• JMP Securities raised Packeteer, Inc's (NASDAQ: PKTR) rating to Market Perform from Underperform.

• Oppenheimer upgraded Playtex Products, Inc (NYSE: PYX) to Buy from Neutral on its acquisition of Tiki Hut, strong fundamentals and realistic investor expectations.

• JP Morgan upgraded shares of American Standard Cos Inc (NYSE: ASD) to Overweight from Neutral.

• Matrix USA raised the rating of Hecla Mining Co (NYSE: HL) to Hold from Sell.

• Shares of VCA Antech, Inc (NASDAQ: WOOF) were upgraded to Outperform from Market Perform at Morgan Keegan.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).