NEW YORK (Reuters) - Investors who loaded up on bullish options bets in Anadarko Petroleum earlier in the week made some hefty potential profits on Thursday when the global energy company announced a settlement that would end years of litigation over health problems across the United States.
Anadarko Petroleum Corp shares hit an all-time high of $100 on Thursday before ending up 14.5 percent at $99.02. The settlement resolved environmental cleanup claims stemming from the 2009 bankruptcy of paint materials maker Tronox brought by a trust for governments, Indian tribes and individuals.
The jump in share prices sharply boosted the value of call options that had been trading actively in the last several days ahead of the announcement.
“Since the options on Anadarko were not expensive in pure dollar value, for people who have been following the stock and expected some sort of a settlement, the potential reward was worth the potential risk they were putting in,” said JJ Kinahan, chief strategist with TD Ameritrade in Chicago.
Among a slew of bullish bets this week, the most notable trades were the $90 calls that expire later this month.
On Tuesday, 15,600 contracts of April $90 calls were traded at between 48 to 80 cents, a significant jump in volume as there were only about 4,491 contracts existing, according to optionMonster.com. The stock closed at $86.56 on Tuesday, more than $10 off the current price.
“Call options that were trading at around 50-70 cents a contract on Tuesday are now trading around $7.50-$8.00. Whoever made the trade just made an awful lot of money,” Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut.
“Someone has been diligent in expecting this to happen but we can’t jump to a conclusion that this is suspicious trading,” he said.
While a sudden increase in bets in a particular stock does not indicate there was any wrongdoing, the options market has often been under scrutiny for unusual trades made ahead of a disclosure of a big deal or other news that moves share prices.
Options volume in Anadarko Petroleum jumped about 11 times the recent daily average on Thursday with 143,000 calls and 14,000 puts traded, according to options analytics firm, TradeAlert.
Among the most active contracts were $105 and $115 calls that expire on May 14. Since call options are generally viewed as bullish, the contracts were mostly based on expectations the stock would rise to those levels by mid-May.
Reporting by Angela Moon; editing by Andrew Hay