For Some Traders, PG&E Clearance Could Mean $5.6 Million Jackpot

(Bloomberg) -- Timely trades in PG&E Corp. options may have reaped a gain of 2,800 percent after a California probe cleared the company of responsibility for a deadly wildfire.

PG&E shares jumped as California Governor Gavin Newsom said the state found that equipment owned by the utility wasn’t at fault for the second-most destructive wildfire in the state’s history, which broke out in wine country in 2017.

At 2:39 p.m. New York time -- about half an hour before that announcement -- 10,000 call options on the stock traded for $200,000 in a bet the stock would climb to $12, or more than 50 percent from Wednesday’s close, by Feb. 8. The trade was soon worth as much as $5.8 million. Reuters reported on the options activity earlier.

PG&E, which was set to file for bankruptcy to deal with crippling liabilities, hasn’t indicated it’s changing course, but the clearance may reduce its wildfire dues by more than half. The stock, which had been trading at a loss earlier in the session, then surged a record 75 percent to $13.95, above the strike of the call.

The Feb. 8, $12 calls changed hands for 20 cents each and rose to as much as $5.80 before ending the day at $3.68. This means the investor or investors could have made $5.6 million from the trade, a 2,800 percent gain. Before Thursday, only 109 of those options existed, data compiled by Bloomberg show.

Another contract grabbed investors’ interest on Thursday before the clearance news broke: a call expiring next January with a $20 strike. An opening block of 3,000 of those options changed hands for 65 cents apiece at 2:55 p.m., surging to as high as $3.57. The trader stands to have made $876,000.

PG&E didn’t immediately respond to phone and email requests for comment about the options trades outside of business hours.

To contact the reporter on this story: Cecile Vannucci in Hong Kong at cvannucci1@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Joanna Ossinger, Teo Chian Wei

©2019 Bloomberg L.P.