Unusual Options Activity: Enbridge (ENB)

Shares of energy infrastructure Enbridge (ENB) have been trending higher in the past year. One trader sees that trend reversing.

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  • That’s based on the April $37.50 puts. With 218 days until expiration, over 11,250 contracts traded against a prior open interest of 151, for a 75-fold rise in volume. The buyer of the puts paid $1.63 to make the trade.

    Shares recently closed in near a 52-week high of $41, but are well off multi-year highs. That’s as the company’s earnings have declined by about 15 percent over the past year.

    The oil and gas midstream company is headquartered in Canada and offers pipelines and midstream storage services.

    Action to take: Traders may want to buy the put option, as energy prices tend to seasonally peak around Labor Day and then trade lower into the end of the year. The options can also serve as an inexpensive hedge against the stock market pulling back in the weeks to come.

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  • Longer-term, investors may like shares on a pullback. Shares are currently valued at about 15 times forward earnings, and shares trade at a 6.7 percent dividend yield. Shares have paid a higher cash amount in the past, and on a drop, long-term buyers may be able to buy a starting yield of 7 percent or higher.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.