$1.5 Million In Blatant Insider Trading Profit Following 3Com Acquisition (Or An Innocent Calendar Spread)
3Com's acquisition by Hewlett Packard for $7.90/share after the close today came as a surprise to many, but not all. Because someone bought 3 times the open interest in November $5 calls and 15 times the open interest of the December calls. In summary: 3,961 Nov $5 calls were purchased today (964 open interest) for $0.65, as were 3,269 December $5 Calls (210 open interest) for $0.85. The profit, assuming the insider action was by one entity, is about $870,000 on the Novembers and $650,000 on the December strikes, for a not too shabby illegal daily P&L of $1.5 million. This is so blatant it is sufficiently stupid that even the SEC will presumably catch the perpetrator. Here's to hoping the trader ends up being Galleon's Raj Raj buying options from his E-Trade account while on bail. Of course, we fully expect any prosecution case against the perpetrator to fall apart at the seams courtesy of a completely inept legal team at the SEC and the Justice Department.
The chart below summarizes the trading action in COMS $5 near term calls.
And here one can see what a blazing outlier today's volume action was in December $5 calls.
h/t ever vigilant momo chaser C-Mac
(2 votes)
on Wed, 11/11/2009 - 17:06
#127592
it wasn't me.
my gosh after Perot Systems just a month ago, people still don't catch on. Look I know everyone wants to be Goldman Sachs, but GS gets away with it. You don't.
on Wed, 11/11/2009 - 18:17
#127695
My thoughts exactly - amazing that people still think they can get away with it: "oh, these are OPTIONS, I will NEVER get caught with those."
Better off just buying the stock, it is less noticeable.
on Wed, 11/11/2009 - 18:19
#127698
What makes you think they won't get away with it?
on Wed, 11/11/2009 - 18:59
#127754
It was my Cat that walked over the keyboard that brought them, Honest Officer It was 'Lucky' the Cat.
on Wed, 11/11/2009 - 17:05
#127596
look at who also purchased a bunch of shares last quarter
on Wed, 11/11/2009 - 17:07
#127597
Wait, you mean Strong From Market Effciency does not exist? I'm shocked, shocked, I tell you!
on Wed, 11/11/2009 - 18:12
#127687
It was 100% luck. Next, you're going to say semi-strong and weak form don't exist either. What will financial services professionals do when it isn't "statistically impossible" for them to do their job well?
on Wed, 11/11/2009 - 17:17
#127617
"Of course, we fully expect any prosecution case against the perpetrator to fall apart at the seams courtesy of a completely inept legal team at the SEC and the Justice Department."
Worked for Cioffi and Tannin didn't it? Hi fivin' in the parking lot...
People underestimate the value of fucking up on purpose when you don't want to do something. Our little illiterate, nitwit Bush made a career out of it...
Or you are paid not to... or your future lucrative employment offer depends on you screwing the pooch...
on Wed, 11/11/2009 - 17:18
#127621
Do you get $50K for that gem Tyler?
on Wed, 11/11/2009 - 17:19
#127624
Tyler, this looks like a delta neutral calendar spread, not a buyer of both.
on Wed, 11/11/2009 - 17:42
#127651
Possible. Horrendous timing though.
on Wed, 11/11/2009 - 17:54
#127667
or designed to look like one? highest trading in 26
months just happens to be market neutral?
on Wed, 11/11/2009 - 21:55
#127935
Agreed, implied vol was practically unched today. That would not be the case if some one came in and lifted the offer on 3x the open interest.
on Thu, 11/12/2009 - 08:57
#128352
I agree.. on bloomberg these options are clearly marked as a Spread Trade (SP in the QR screen) and printed at exactly the same time. It was most certainly a calendar spread, and yes though the timing is suspect its not as aggregious as somebody buying both calls outright.
on Wed, 11/11/2009 - 17:20
#127626
Martha Stewart obviously just had bad timing.
on Wed, 11/11/2009 - 17:37
#127645
Tyler scooped everyone on this one. The other sites are now reporting....
on Wed, 11/11/2009 - 17:51
#127662
I think Karl D was pretty close.
on Wed, 11/11/2009 - 17:51
#127663
TD is fast, but I think Denninger beat him to this one.
on Wed, 11/11/2009 - 17:39
#127647
Is this gonna require a separate billing to the SEC or do you still have time to append this to yesterday's?
on Wed, 11/11/2009 - 17:50
#127660
They didn't catch Brian Sack when he was in the back room at State street. What makes you think they will catch him now?
on Wed, 11/11/2009 - 17:43
#127653
Maybe it was all of the flash trading on the options markets ha ha ha ha ha! Right-scourge of the Market...
Inside info cold and simple. SEC--Find them and put them in jail.
on Wed, 11/11/2009 - 19:21
#127654
From Chumbawamba:
http://www.ilike.com/artist/Chumbawamba/track/Mary,+Mary?src=onebox
on Wed, 11/11/2009 - 17:52
#127664
Denninger gets the 50k, he had it up first. But Tyler wins best site ever and has banked more fiatso's via the reward thus far, if the czars don't take it away later.
on Wed, 11/11/2009 - 17:57
#127672
It looks like both legs were bought, as implied vol in both months went up. If one side was sold (as in a calendar spread), the size of the trade would have smashed the vol of that month.
on Wed, 11/11/2009 - 17:58
#127675
It looks like both legs were bought, as implied vol in both months went up. If one side was sold (as in a calendar spread), the size of the trade would have smashed the vol of that month.
on Wed, 11/11/2009 - 17:59
#127676
Seems hard to believe someone would do a calendar spread in a name with options this illiquid -- 7k calls when the open interest for every COMS option was 17k? And it looks like both the Nov and Dec calls were bought on the offer, though I can't confirm that.
on Wed, 11/11/2009 - 18:22
#127705
Still wondering who bought all those put options on UAL days before 9/11.
on Wed, 11/11/2009 - 19:31
#127785
Same genetics currently long Nov. oil calls.
on Wed, 11/11/2009 - 18:27
#127712
Does it matter if it was Karl or Tyler first? The IMPORTANT thing is that these things are being given light to. The fact that these activities are being confirmed by more than one source is indicative of the veracity of those sources. In other words, well done to both Tyler and Karl and thanks to both.
DavidC
on Wed, 11/11/2009 - 18:58
#127752
Best reply so far...People are morons. 2 me this seems like a low level leak. if someone was going to do this i feel like they would swing for the fences.. only 1.5 mil? at least perot systems was like 30 mil. either way some people are just idiots and make everyone else who tries to make a living trading look like crooks. good riddance
on Wed, 11/11/2009 - 18:38
#127729
Zero Hedge is better than Michael Savage.
Keep it coming boys....and girl!
on Wed, 11/11/2009 - 20:43
#127867
on Wed, 11/11/2009 - 18:39
#127734
Tyler,
COMS cancelled their Goldman Conf call gig yesterday. BRCD did too, but later IR told CTO caught swine flu. COMS remained silencio.
suspect that triggered the options bet.
Dont think anyone was stupid enough to bet on COMS t/o in light of what happened at Galleon.
just my 2c.
on Wed, 11/11/2009 - 19:37
#127794
Ok this is absolutely ridiculous. Blankfein needs to issue another reminder to all his minions to prevent this from happening again:
From: God's Right Hand
To: minions
Subject: Project Doing God's Work
It looks like there's still a real human being watching some of the order flows out there. I know I know, I thought we'd discouraged them all by now, but apparently there's some holdouts. Don't worry they will be gone soon enough, we just need to gun this market a little bit higher and their positions will be eliminated. However, in the meantime, I need to remind you that whenever you get too reckless (opening outsized positions, last minute orders, etc) and get too much attention, you will have to be given to the SEC to get your hand slapped. Just look at the Galleon folks, after this all they'll be able to look forward to is CEO positions at companies that rank in Fortune's upper teens or higher, or *gasp*, public office to bend over for the rest of us.
So let's still be careful out there until we're within the final stage of this project. We're so close, why take such careless risks?
Sincerely,
God's Lloyd
on Thu, 11/12/2009 - 00:39
#128069
Tyler, not a delta neutral spread (nov traded more than dec, and has a higher delta). I find it hard to believe the CBOE crowd would sell both lines, particularly the Nov at only 8 cents above parity. I am really puzzled.
on Thu, 11/12/2009 - 00:39
#128070
Tyler, not a delta neutral spread (nov traded more than dec, and has a higher delta). I find it hard to believe the CBOE crowd would sell both lines, particularly the Nov at only 8 cents above parity. I am really puzzled.
on Thu, 11/12/2009 - 12:34
#128630
This must be the reason Galleon covered its 3com shorts two weeks ago.
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