Well-timed bullish options bet in Shaw Group raises eyebrows

Mon Jul 30, 2012 10:12pm IST

Related Topics

Stocks

   
Rajalakshmi (C), 28, smiles after winning the Miss Wheelchair India beauty pageant in Mumbai November 26, 2014. REUTERS/Danish Siddiqui

Miss Wheelchair India

Seven women from across India participated in the country's second wheelchair beauty pageant, which aims to open doors for the wheelchair-bound in modelling, film and television, according to organisers  Slideshow 

* Large out-of-the-money bullish options bet placed last week

* Shaw Group shares jump more than 50 pct on M&A news

By Angela Moon

NEW YORK, July 30 (Reuters) - With Shaw Group Inc shares up more than 50 percent on Monday, one investor made a stunning return by placing some well-timed bullish bets in options last week, raising eyebrows among options market watchers.

According to several options market participants, one investor purchased 2,000 Aug $29 calls in Shaw Group for 25 cents a piece on Thursday. With Shaw shares hitting all-time high near $44 on Monday, the calls were worth about $14, a stunning 5,600 percent return for the investor.

"The timing of this does look rather suspicious and the fact someone bought some out-of-the-money calls at the Aug 29-strike, which is 12 percent out-of-the-money, only adds to the suspicion," said Ryan Detrick, senior analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

Chicago Bridge & Iron Co said on Monday that it would buy Shaw Group for about $3 billion in cash and stock to create a big engineering and construction company focused on the energy industry. Netherlands-based CB&I offered $46 per share - $41 in cash and $5 in stock - a premium of 72 percent to Shaw's closing price on Friday, the companies said.

Shaw Group stock jumped about 60 percent to $43.70, while CB&I fell 14.9 percent to $34.67.

"Insider trading? Maybe. Certainly very shrewd timing on the purchase, wouldn't you say?" said Jon Najarian, co-founder of OptionMonster.com.

Suspicious trades prior to merger announcements are not uncommon in the options market. Just last week, a number of large well-timed bullish bets in the options of Canadian oil producer Nexen Inc were spotted, ahead of a takeover deal announcement.

The U.S. Securities and Exchange Commission has now accused a Hong Kong-based firm of insider trading ahead of the public disclosure that China's oil producer CNOOC plans to acquire Nexen.

FILED UNDER:

Online Grocery Shopping

REUTERS SHOWCASE

Vodafone Tax Dispute

Vodafone Tax Dispute

India advised against challenging Vodafone tax ruling - source  Full Article 

Banking Sector

Banking Sector

India's laggard state lenders face tough sell on capital raising plan  Full Article 

Trade Deal

Trade Deal

WTO postpones trade deal by a day after last-minute objection.  Full Article 

Falling Oil Prices

Falling Oil Prices

Saudis signal no push for oil cut as market to "stabilise itself"  Full Article 

Raising Stake

Raising Stake

Nippon Life to raise stake in Reliance Capital fund unit  Full Article 

Sterilisation Camps

Sterilisation Camps

Sterilisation targets remain in all but name, critics say  Full Article 

Share Buyback

Share Buyback

Samsung Electronics to buy back $2 billion in shares  Full Article 

Microsoft in China

Microsoft in China

Microsoft to pay China $140 million for 'tax evasion'   Full Article 

Flashback: 26/11

Flashback: 26/11

The three-day attack in November 2008 left 166 dead.  Slideshow 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage