Guest Post – A New Record High on SE by Andrew Keene

TradingPub Admin | June 12, 2013

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Thanks to Andrew Keene of for the following guest post.

SE – Record High

Shares of Spectra Energy (Ticker: SE) hit a record high in intraday trading today, June 12, shortly after markets opened.  The stock hit $33.96 and remains over $33.00 as of the time of writing, which represents a 10% gain day-to-day.  The Houston, Texas based company stores, distributes, gathers and processes natural gas, and is the operator of one of the largest pipeline systems in the US. SE has climbing steadily this year, and was up 11% YTD prior to today’s rally.

The ≈10% jump this morning was the result of an announcement made yesterday evening regarding the sale of U.S. assets to a partnership that it controls, Spectra Energy Partners (SEP), according to Bloomberg Businessweek. The proposed move would allow Spectra to lift annual dividends to 12 cents, up from the current level of 8 cents.  The company will face greater growth potential due to the cheaper cost of equity resulting from this exchange to such a degree as to suggest a post-deal stock valuation over $40 according to a presentation by Sandell Asset Management.

The company may also expand on these efforts, as Sandell has recently amasses a large stake and is urging the management at Spectra to take further, more robust action. The specifics of the deal will officially be reported with Q2 earnings in August.


The “Institutional Trade”:

On 5.30.2013 A trader bought 10,239 SE Sep 33 Calls for $.425
On 6.4.2013 A trader bought 3250 SE Sep 33 Calls for $.425
On 6.5.2013 A trader bought 3814 SE Sep 33 Calls for $.40
On 6.6.2013 A trader bought 5076 SE Sep 33 Calls for $.40
On 6.7.2013 A trader bought 2889 SE Sep 33 Calls for $.425

So, between 5.30.2013 and 6.7.2013 a trader bought over 25,000 SE Sep 33 Calls for $.425 on average.  Lets break it down a little more:

Risk: $42.50 per 1 lot
Reward: Unlimited
Breakeven: $33.425
Cash Outlay: $1,073,890 ish

Today, SE rallied to $33.60 and those Calls that were purchased are worth $1.80.

Total Profits by a Trader in SE: ($1.80 - $.425 * 25,268)= $3,474,350

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