Unusual Options Activity In PG&E Corporation
PG&E faces at least $30 billion in potential liability costs stemming from wildfires in 2017 and 2018, many allegedly started by the company’s equipment, that have led state officials to doubt the safety of the company’s electric distribution system.
Investigators have already determined PG&E’s equipment liable in at least 17 major wildfires in 2017. State investigators are still working to determine if the company’s equipment was partly responsible for November’s Camp Fire, which killed at least 86 people and destroyed about 14,000 homes, making it the state’s deadliest fire.
PG&E Corp. stock cratered Monday after the company said it will file for Chapter 11 bankruptcy protection amid the financial anguish stemming from its part in helping spark a wave of historic wildfires in California. Shares of the company plunged 52 percent to $8.38 per share Monday, one day after the company said Chief Executive Geisha Williams was stepping down. The stock has lost more than 80 percent of its value over the last three months.
Unusual option activity is defined as a single trade that is bought on the ask or sold on the bid, with unusual volume and/or trade size compared to the open interest for that particular strike and expiry.
Unusually large purchases of options contracts indicate that the Smart Money thinks there is an impending event that will move a stock in a big way. They timed this one perfect. I tried to look at unusual options activity every day, but after the close. As a result, I personally wasn’t able to participate in this opportunity.
This past Friday, the March put options were going crazy. Originally I thought it was a spread trade, but the Smart Money was buying the put options like they were going out of style.
And when the Markets closed on today, those trades were handsomely rewarded. The stock was down 50%,
but those same options were up 200%.
This is especially why I like options because it offers a type of leverage stocks can't give me. More importantly, there is more to life than trading. My heart goes out to the families affect by the fires last year...people we burned alive, while trapped in their cars. We take for granted may things...until it's taken away from us.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Seems like some traders will be getting a call from the SEC pretty soon! Interesting to see it trading this high despite the bankruptcy. I would guess it is because of the underlying real assets that exist within its portfolio which could wind up being sold off to meet liabilities in the future.
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It will be under $5 soon as there were a lot of put options bought at that strike price as well.