By Doris FrankelOct 17 (Reuters) - Some lucky players may have reaped a
tidy windfall with El Paso’s bullish options after
Kinder Morgan Inc unveiled a $21 billion takeover bid.The call buying in the stock appears to have been
well-timed but not indicative of insider trading, according to
one analyst.A number of investors bought calls granting them the right
to buy El Paso shares at $17, $19 and $21 apiece by Nov. 18
expiration ahead of the merger announcement made on Sunday. El
Paso shares late on Monday rose more than 25 percent to
$24.56.”The call buying in the November contract in the days and
weeks leading up to the deal has certainly worked out for some
traders who have seen the value of their positions rise
substantially,” said Interactive Brokers Group options analyst
Caitlin Duffy.”While they are well-timed, the activity did not look
suspicious,” she said.Kinder Morgan on Sunday announced the $21 billion deal to
buy El Paso Corp, combining the two largest natural gas
pipeline operators in North America in a huge bet on the
fast-growing market for the natural gas.The offer of $26.87 per share in cash, shares and warrants,
represents a 37 percent premium over the $19.59 closing price
of El Paso stock on Friday.Duffy said the huge rally in El Paso’s shares overnight
resulted in massive profits on paper for some investors who had
picked up November calls over the past few weeks. Investors
often turn to calls hoping to profit on a stock price rise.The number of outstanding positions in El Paso’s November
$17 strike calls suggests one or more traders purchased around
1,250 contracts at that strike for an average premium of $1.49
each on Sept. 26, Duffy said. Those calls cost nearly five
times that amount at $7.25 per contract late on Monday.More recently, Duffy said about 1,600 EP calls were likely
purchased at the November $19 strike on Friday at an average
premium of $1.35 apiece. The contracts on Monday were trading
on average at $5.20, a potential 280 percent return, according
to Trade Alert.At the November $21 EP call strike, open interest suggests
traders picked up roughly 1,000 contracts for an average
premium of 32 cents each at the end of last week. The premium
required to buy the November $21 call on Monday was 10 times
that amount at around a $3.50 a contract, Duffy said.On Sept. 26, an options combination was initiated in El
Paso and involved the purchase of 5,000 November $18 calls and
the sale of 5,000 November $15 puts, resulting in a net cost of
29 cents, according to data from Chicago website optionMonster.
The shares traded at $17.03 at the time of the posting.A call purchase and a put sale are a “simulated” long
position in a stock. The trade paid off.”Total premium for the investor for the original trade was
$145,000, and now it has a potential worth of $3.7 million,”
said optionMonster co-founder Jon Najarian. “I believe it does
bear scrutiny.”The U.S. Securities and Exchange Commission, which looks
into unusual stock and option trading, declined to comment.Other option participants said the call action was not
heavy or significant enough to raise eyebrows in the U.S.
options market, where insider trading is often detected first.
By Doris FrankelOct 17 (Reuters) - Some lucky players may have reaped a
tidy windfall with El Paso’s bullish options after
Kinder Morgan Inc unveiled a $21 billion takeover bid.The call buying in the stock appears to have been
well-timed but not indicative of insider trading, according to
one analyst.A number of investors bought calls granting them the right
to buy El Paso shares at $17, $19 and $21 apiece by Nov. 18
expiration ahead of the merger announcement made on Sunday. El
Paso shares late on Monday rose more than 25 percent to
$24.56.”The call buying in the November contract in the days and
weeks leading up to the deal has certainly worked out for some
traders who have seen the value of their positions rise
substantially,” said Interactive Brokers Group options analyst
Caitlin Duffy.”While they are well-timed, the activity did not look
suspicious,” she said.Kinder Morgan on Sunday announced the $21 billion deal to
buy El Paso Corp, combining the two largest natural gas
pipeline operators in North America in a huge bet on the
fast-growing market for the natural gas.The offer of $26.87 per share in cash, shares and warrants,
represents a 37 percent premium over the $19.59 closing price
of El Paso stock on Friday.Duffy said the huge rally in El Paso’s shares overnight
resulted in massive profits on paper for some investors who had
picked up November calls over the past few weeks. Investors
often turn to calls hoping to profit on a stock price rise.The number of outstanding positions in El Paso’s November
$17 strike calls suggests one or more traders purchased around
1,250 contracts at that strike for an average premium of $1.49
each on Sept. 26, Duffy said. Those calls cost nearly five
times that amount at $7.25 per contract late on Monday.More recently, Duffy said about 1,600 EP calls were likely
purchased at the November $19 strike on Friday at an average
premium of $1.35 apiece. The contracts on Monday were trading
on average at $5.20, a potential 280 percent return, according
to Trade Alert.At the November $21 EP call strike, open interest suggests
traders picked up roughly 1,000 contracts for an average
premium of 32 cents each at the end of last week. The premium
required to buy the November $21 call on Monday was 10 times
that amount at around a $3.50 a contract, Duffy said.On Sept. 26, an options combination was initiated in El
Paso and involved the purchase of 5,000 November $18 calls and
the sale of 5,000 November $15 puts, resulting in a net cost of
29 cents, according to data from Chicago website optionMonster.
The shares traded at $17.03 at the time of the posting.A call purchase and a put sale are a “simulated” long
position in a stock. The trade paid off.”Total premium for the investor for the original trade was
$145,000, and now it has a potential worth of $3.7 million,”
said optionMonster co-founder Jon Najarian. “I believe it does
bear scrutiny.”The U.S. Securities and Exchange Commission, which looks
into unusual stock and option trading, declined to comment.Other option participants said the call action was not
heavy or significant enough to raise eyebrows in the U.S.
options market, where insider trading is often detected first.
* 700 companies looking to raise $40 bln in U.S. pipelineBy Clare BaldwinNEW YORK, Oct 14 (Reuters) - The U.S. IPO market may be
recovering, but with small deals rather than big, well-known
companies such as Zynga.This week’s initial public offering of wireless equipment
maker Ubiquiti Networks Inc broke a 2-month drought in
the U.S. IPO market, suggesting that investors are again
willing to risk their money on new issues.The IPO raised just over $100 million — on the smaller
side for U.S. IPOs — at $15 a share, or $6 less than the
midpoint of the estimated price range.The cautious approach appears to have worked: Ubiquiti
shares rose 16.7 percent on their first day of trading on
Nasdaq.Whether this deal will pave the way for others is yet to be
seen. Another small IPO, Zeltiq Aesthetics, is scheduled to
price next week. It is expected to raise about $105 million.”Bankers are testing the water,” said Jack Ablin, chief
investment officer for Harris Private Bank with $60 billion
under management.Ablin said he, along with the rest of the market, would be
watching to see how the deals do.Morningnotes.com founder and IPO analyst Ben Holmes agreed:
“What we want to see is that the equity capital markets can
function in this market and turn out product that people will
buy,” he said. “This is a smoke signal for the market.”Europe’s debt crisis and a weak U.S. economic recovery have
made it difficult to price new issues. Most companies have
opted to delay going public until there is less volatility.Markets have been yo-yo-ing since a major sell-off in July,
but have risen in recent days. The Standard & Poor’s 500 index closed at 1,224.58 on Friday, up 13.9 percent from
an intraday low on Oct. 4.A market turnaround and lower levels of volatility will be
key to restarting the IPO market, experts said.Companies, their bankers, and investors are anxiously
waiting for that to happen. Since the beginning of 2009, more
than 700 companies looking to raise more than $40 billion have
filed for U.S. IPOs, according to Thomson Reuters data.
Included in that backlog are large offerings from companies
such as game developer Zynga and daily deals site Groupon.But for now, at least, the deals remain small.Next Tuesday, Zeltiq Aesthetics and its owners are
scheduled to sell 7 million shares at $14 to $16 each. The IPO
would raise $105 million at the midpoint of the estimated price
range.The company has developed a proprietary cooling technology
that eliminates body fat by cooling it. The company says the
technique, “CoolSculpting,” is a good option for people who
can’t get rid of the fat by dieting or exercising.The company has never been profitable but received
clearance from the U.S. Food and Drug Administration in
September 2010. The shares are expected to trade on Nasdaq
under the symbol “ZLTQ”.
* 700 companies looking to raise $40 bln in U.S. pipelineBy Clare BaldwinNEW YORK, Oct 14 (Reuters) - The U.S. IPO market may be
recovering, but with small deals rather than big, well-known
companies such as Zynga.This week’s initial public offering of wireless equipment
maker Ubiquiti Networks Inc broke a 2-month drought in
the U.S. IPO market, suggesting that investors are again
willing to risk their money on new issues.The IPO raised just over $100 million — on the smaller
side for U.S. IPOs — at $15 a share, or $6 less than the
midpoint of the estimated price range.The cautious approach appears to have worked: Ubiquiti
shares rose 16.7 percent on their first day of trading on
Nasdaq.Whether this deal will pave the way for others is yet to be
seen. Another small IPO, Zeltiq Aesthetics, is scheduled to
price next week. It is expected to raise about $105 million.”Bankers are testing the water,” said Jack Ablin, chief
investment officer for Harris Private Bank with $60 billion
under management.Ablin said he, along with the rest of the market, would be
watching to see how the deals do.Morningnotes.com founder and IPO analyst Ben Holmes agreed:
“What we want to see is that the equity capital markets can
function in this market and turn out product that people will
buy,” he said. “This is a smoke signal for the market.”Europe’s debt crisis and a weak U.S. economic recovery have
made it difficult to price new issues. Most companies have
opted to delay going public until there is less volatility.Markets have been yo-yo-ing since a major sell-off in July,
but have risen in recent days. The Standard & Poor’s 500 index closed at 1,224.58 on Friday, up 13.9 percent from
an intraday low on Oct. 4.A market turnaround and lower levels of volatility will be
key to restarting the IPO market, experts said.Companies, their bankers, and investors are anxiously
waiting for that to happen. Since the beginning of 2009, more
than 700 companies looking to raise more than $40 billion have
filed for U.S. IPOs, according to Thomson Reuters data.
Included in that backlog are large offerings from companies
such as game developer Zynga and daily deals site Groupon.But for now, at least, the deals remain small.Next Tuesday, Zeltiq Aesthetics and its owners are
scheduled to sell 7 million shares at $14 to $16 each. The IPO
would raise $105 million at the midpoint of the estimated price
range.The company has developed a proprietary cooling technology
that eliminates body fat by cooling it. The company says the
technique, “CoolSculpting,” is a good option for people who
can’t get rid of the fat by dieting or exercising.The company has never been profitable but received
clearance from the U.S. Food and Drug Administration in
September 2010. The shares are expected to trade on Nasdaq
under the symbol “ZLTQ”.
