Reuters: Global Markets: Well-timed bullish options bet in Shaw Group raises eyebrows

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Well-timed bullish options bet in Shaw Group raises eyebrows Jul 30th 2012, 16:54 By Angela Moon NEW YORK | Mon Jul 30, 2012 12:54pm EDT NEW YORK (Reuters) - With Shaw Group Inc (SHAW.N) 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 (CBI.N) 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 (NXY.N) (NXY.TO) 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 (0883.HK) plans to acquire Nexen. (Reporting by Angela Moon; Editing by Leslie Gevirtz) Link this Share this Digg this Email Reprints

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