Chesapeake Energy (NYSE-CHK), a producer of natural gas, is recently trading at $18.25 in pre-open trading, above its close of $16.52. Mcclendon Aubrey Kerr, Chairman of CHK, sold 31,522,923 shares at $18.06 for $569,326,055 from October 8 to October 10. CHK will host an analyst meeting on October 15. CHK's Natural Gas futures are recently up 1.90% to $6.659 according to Bloomberg. CHK November option implied volatility of 198 is above its 26-week average of 57 according to Track Data, suggesting larger price movement.

Lloyds TSB Group (NYSE-LYG), Royal Bank of Scotland Group Plc (NYSE-RBS) and HBOS Plc will get a $64 billion bailout from the U.K. government. LYG over all option implied volatility of 111 according to Track Data, suggesting large price movement.

Banco Santander (NYSE-STD) closed at $12.34. STD confirmed it's in talks to acquire full control of Sovereign - (NYSE-SOV). STD has a 24.9% stake in SOV and three seats on the board. STD November option implied volatility of 104 is above its 26-week average of 43, suggesting larger price movement.

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

Analyst upgrades:

• Keefe Bruyette upgraded shares of AllianceBernstein (NYSE: AB) to Outperform from Market Perform as they find AB's risk/reward attractive given its attractive long-term business model. Wachovia upgraded Watson Pharma (NYSE: WPI) and Teva Pharma (NASDAQ: TEVA) to Outperform from Market Perform citing valuations and positive drivers for generics that include patent expirations and market share expansion.
• UBS raised Lloyds TSB Group (NYSE: LYG) to Neutral from Sell on expected pricing power following the HBOS (OTC: HBOOY) acquisition.
• Otter Tail (NASDAQ: OTTR) was upgraded to Outperform from Neutral at Baird.
• GFI Group (NASDAQ: GFIG) was upgraded at Citigroup to Hold from Sell.
• Merrill upgraded Logitech (NASDAQ: LOGI) to Neutral from Underperform.

Analyst downgrades:

• JP Morgan downgraded shares of Lloyds TSB Group to Underweight from Neutral on capital concerns and believes the HBOS acquisition is not in the best interest of shareholders.
• Stephens downgraded Universal Truckload (NASDAQ: UACL) to Equal Weight from Overweight on valuation and concerns about a slowdown in the flatbed sector. The firm's target remains $28.

HBOS Plc is the largest mortgage operator in the UK. And yes, it needs lots of money to shore up its balance sheet.

Unfortunately, raising capital has turned out to be an extremely tough task.

When HBOS engaged in a rights offering, only about 8% of outside investors subscribed. As a result, the company's underwriters -- Morgan Stanley (NYSE: MS) and Dresdner Kleinwort Ltd. -- are now stuck with $7.6 billion in unwanted securities.

Since this was a firm commitment offering, HBOS was able to get its much-needed cash.

However, the problem is that this deal is likely to chill further investment in the UK banking sector. After all, who would want to take on the risk?

Thus, while there may be more capital infusions from private equity firms, which have large amounts of capital, no doubt their term sheets are likely to be quite onerous.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Until the check clears, it's really not a done deal. That's definitely the case with the buyout of Alliance Boots, the UK's largest drugstore chain.

Originally, it looked like KKR would be the buyer, along with Stefano Pessina (who is the chairman of Alliance and owns 15% of the company). But, private equity firm Terra Firma Capital Partners has a better offer: $21.8 billion. The firm also has the financial support of the Wellcome Trust and HBOS PLC.

Interestingly enough, a few hours before this bid, KKR and Pessina upped its own bid.

Yes, it must be nice for Alliance shareholders. In fact, based on the activity in the stock, the betting is that there will be even more bids.

Alliance does have a serious footprint, with about 3,100 stores, as well as a thriving wholesale business.

Oh, and yes, there are opportunities to cut costs. And, with the valuation getting frothier, I think even more employees will lose jobs so as to pay off the debt the private equity players will load onto Alliance.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.