Questions raised on 3Com trading
NEW YORK - Analysts say good timing alone doesn’t account for trading in bullish 3Com Corp. options Wednesday, which gained as much as 315 percent yesterday.
Volume in contracts to buy shares of the company, based in Marlborough, 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 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 Wednesday, 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.
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 Wednesday’s closing price.
“Somebody knew something was coming,’’ said Stefen Choy, founder of Livevol Inc., a San Francisco-based provider of options market data and analytics.
John Heine, an SEC spokesman, declined to comment about 3Com.
