The biggest U.S. options trades in the past two days have been in a stock that most people have never heard of: Boardwalk Pipeline Partners LP.
A record 271,000 calls were traded on May 5 in the Houston-based company, 141 times the average from the past year, according to data compiled by Bloomberg. In the individual contracts, volume was double the most-active options of an exchange-traded fund linked to the Standard & Poor’s 500 Index.
Investors are increasing purchases of calls amid speculation Boardwalk Pipeline, a natural gas transporter majority owned by Loews Corp., will rebound from a 35 percent plunge since February, according to Christopher Rich, head options strategist at JonesTrading Institutional Services LLC. The stock tumbled after the company cut quarterly payments to investors amid a decline in cash flow.
“Not many people have the ability to do that many options,” Rich said in a phone interview from Chicago. “I don’t think it’s necessarily a takeover, but I do think you could see positive announcements. Could there be a split-up of the company? Maybe. Could there be all sorts of things that could unlock shareholder value and take the stock higher? Absolutely.”
Telephone and e-mail messages to Molly Whitaker, director of investor relations, were not immediately returned.
The January $17.50 calls and June $15 calls on Boardwalk Pipeline were the most-traded U.S. options yesterday, with trading on each exceeding 118,000 contracts, data compiled by Bloomberg show.
May $187 puts on the SPDR S&P 500 ETF Trust were the third-most traded at 56,000 contracts yesterday. May $189 calls on the ETF had the highest volume today at 104,000 contracts.
The shares have probably bottomed, John Edwards, an analyst with Credit Suisse Group AG in Houston, wrote in an April 29 note. He raised the stock’s rating to outperform from underperform and said the company may be able to raise its payout to a “normalized” level as early as 2017.
Increased U.S. gas production has reduced transportation rates and revenue from storage services is expected to decline, Chief Executive Officer Stanley Horton told analysts on a February conference call.
Call trading in the stock has been increasing since the stock plunged earlier this year. A median of 2,073 bullish contracts have traded each day since Feb. 1, compared with 106 during the same time last year, data compiled by Bloomberg show.
“It seems that the buyers in this case are not only sizable institutional investors, but also appear perhaps to be vested in the company’s prospects,” Andrew Wilkinson, chief market analyst at Greenwich, Connecticut-based Interactive Brokers LLC, said in a report yesterday. “This is probably a well-established position that has been building up during the past six weeks.”