Nov. 12 (Bloomberg) -- Analysts say good timing alone doesn’t account for trading in bullish 3Com Corp. options yesterday, which gained as much as 315 percent today.

Volume in contracts to buy shares of the Marlborough, Massachusetts-based company surged to the highest level since September 2007 before Hewlett-Packard Co. said it would buy the maker of computer-networking equipment for $2.7 billion.

“I don’t believe in that much luck,” said Steve Claussen, chief investment strategist at OptionsHouse LLC, the Chicago- based online brokerage unit of options trading firm PEAK6 Investments LP, and a former market maker at the Chicago Board Options Exchange. “If you’re on the other side of someone buying calls and a takeover is announced, it’s like someone held you up at gunpoint. It’s like you’ve been robbed and you feel violated.”

Call options that convey the right to acquire stock for a given price by a certain date usually offer higher returns to traders speculating on takeovers. The U.S. Securities and Exchange Commission polices the options market to ensure investors aren’t engaging in insider trading.

More than 8,000 3Com calls changed hands yesterday, 17 times the four-week average. The most active were contracts conveying the right to purchase 3Com for $5 through Nov. 20, followed by December $5 calls. The shares rose 5.2 percent, the most since Sept. 28, to $5.69 in Nasdaq Stock Market composite trading prior to the announcement.

$5 Calls

Almost 4,000 of the November $5 calls and 3,300 December $5 calls traded, with almost all of the transactions occurring at noon. That compares with a total of six puts giving the right to sell 3Com shares. Hewlett-Packard, the world’s largest personal- computer maker, agreed to pay $7.90 a share in cash for 3Com, a 39 percent premium to yesterday’s closing price.

More than 22 million shares of 3Com changed hands in the stock market yesterday, compared with this year’s daily average of 4.85 million and the most since March 2008. Trading was heaviest in the hour after 11 a.m. in New York, data compiled by Bloomberg show.

“Somebody knew something was coming,” said Stefen Choy, founder of Livevol Inc., a San Francisco-based provider of options market data and analytics. “It looks like very unusual call buying. I see this very frequently when there’s a takeover.”

Today’s Surge

John Heine, an SEC spokesman, declined to comment about 3Com. Hewlett-Packard declined to comment, spokesman David Shane said. Anastasia Efstratios, a spokeswoman with an outside agency that represents 3Com, didn’t immediately respond to a voicemail message seeking comment.

3Com surged 31 percent to $7.46 in 4 p.m. Nasdaq Stock Market composite trading today. The November $5 calls added as much as 315 percent to $2.70, and the December $5 calls jumped up to 212 percent to $2.65.

Most of yesterday’s call volume came from investors creating new positions. The open interest, or number of existing contracts, for the November $5 calls more than quadrupled to 4,663, while December $5 calls jumped 15-fold 3,328. At least 95 percent of the trading in both contracts was on the ask price, indicating buyers initiated the transactions.

Calendar Spreads

Jon Najarian, co-founder of OptionsMonster Holdings Inc. in Chicago, said the call trades may have been so-called calendar spreads in which an investor sells contracts expiring in one month and buys options with the same strike price further in the future. Claussen of OptionsHouse agreed that it’s a possibility. Some types of calendar spreads lose money if a stock gains. 3Com shares rose as much as 36 percent to $7.72 after the announcement.

“It certainly could be a calendar spread,” though such a strategy is unlikely nine days before November contracts expire, Najarian said. “There’s no reason you’d roll them to the next month unless you had an inkling that something was about to happen.”

Goldman Sachs Group Inc. advised 3Com on the transaction, while Morgan Stanley helped Hewlett-Packard, according to data compiled by Bloomberg. Both banks are based in New York. 3Com has its headquarters in Marlborough, Massachusetts, and Hewlett- Packard is based in Palo Alto, California.

Sales of $118 Billion

Chief Executive Officer Mark Hurd is seeking to add to Hewlett-Packard’s $118 billion in annual sales after the sharpest slump in PC demand in history. The purchase of 3Com increases competition with Cisco Systems Inc., the world’s largest maker of computer-networking equipment, which is also expanding into Hewlett-Packard’s businesses.

Hurd said in March at an investor conference that Hewlett- Packard will take a “disciplined” approach to takeovers. The company has bought more than 30 companies since he took over as CEO in 2005, according to data compiled by Bloomberg. Hewlett- Packard already expanded its computer-services business last year with the $13.2 billion takeover of Electronic Data Systems.

The SEC sued an employee at former presidential candidate H. Ross Perot’s investment adviser in September for buying options with advance knowledge of Dell Inc.’s $3.9 billion bid for Perot Systems Corp.

In the Perot case, the SEC filed a lawsuit against Reza Saleh two days after Dell’s acquisition was announced. He allegedly reaped an $8.6 million profit buying call options less than three weeks before Dell’s biggest-ever deal, according to the regulator. Saleh worked at Parkcentral Capital Management LP and Perot Investments, which have affiliations and share space with Perot Systems, giving him access to information about the company, the SEC said.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

Last Updated: November 12, 2009 16:22 EST