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Will Enterprise explore new space?

One investor apparently thinks that Enterprise Products Partners will keep on running.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 2,000 March 45 calls for $1.55 and the sale of an equal number of March 43 puts for about $1.60. Volume was more than twice open interest in both strikes.

The trade generated a credit of $0.05, but the real money will be made to the upside if EPD continues to rally. The pipeline stock is up 9 percent in the last three months and seems to be breaking out of a year-long consolidation pattern between the $40 and $44 levels. It closed at $44.87 yesterday, down 2.33 percent in the session.

While investors often sell puts and buy calls to simulate owning shares in a stock, yesterday's option prices made the transaction interesting. Given that the share price is closer to the strike price on the calls, they should have cost more than the puts. (See our Education section)

The reason they didn't is that implied volatility was just 18 puts on the calls versus 23 percent in the puts. This suggests that the market is more worried about EPD falling than rallying, a perception exploited by the trader. Similar trades have occurred recently in American Capital Agency and United Technology .

Overall option volume in EPD was 6 times greater than average in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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