$1.5 Million In Blatant Insider Trading Profit Following 3Com Acquisition (Or An Innocent Calendar Spread)

Tyler Durden's picture

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

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TraderMark's picture

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.

ghostfaceinvestah's picture

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.

E pluribus unum's picture

What makes you think they won't get away with it?

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Vedavyas's picture

It appears like there is nonetheless a genuine human becoming viewing a few of the order flows available. I understand I understand, I believed we'd discouraged all of them right now, but apparently there is some holdouts. Do not be concerned they will probably be gone quickly sufficient, we simply have to gun this marketplace just a little bit greater and their positions will probably be eradicated. Nevertheless, within the meantime coffee makers, I have to remind you that whenever you receive as well reckless (opening outsized positions, final minute orders, and so on) and obtain an excessive amount of consideration, you'll need to be provided towards the SEC to obtain you slapped. Just appear in the Galleon people, following this all they will be in a position to appear ahead to is CEO positions at businesses that rank in Fortune's upper teenagers or greater, or *gasp*, public workplace to bend more than for the remainder people.

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Paul Steinborn's picture

look at who also purchased a bunch of shares last quarter

Daedal's picture

Wait, you mean Strong From Market Effciency does not exist? I'm shocked, shocked, I tell you!

Capitalist Man's picture

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? 

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Problem Is's picture

"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...

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andrew123's picture

Tyler, this looks like a delta neutral calendar spread, not a buyer of both.

Tyler Durden's picture

Possible. Horrendous timing though.

Anonymous's picture

or designed to look like one? highest trading in 26
months just happens to be market neutral?

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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.

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hazenyc's picture

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.

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Harbourcity's picture

Martha Stewart obviously just had bad timing.

 

 

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Rollerball's picture

I think Karl D was pretty close.

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TD is fast, but I think Denninger beat him to this one.

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Cursive's picture

Is this gonna require a separate billing to the SEC or do you still have time to append this to yesterday's?