AirTran (AAI) - Lucky Bet or Cheater in Takeover?

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AAI is trading $7.35, up 61.5% with IV30™ down 55.4% on takeover news. The LIVEVOL™ Pro Summary is below.



The news from United Press International:
"U.S. discount carrier Southwest Airlines said Monday it had agreed to purchase AirTran Airways for $1.4 billion in cash and common stock. The deal values AirTran at $7.69 per share, a premium of 69 percent over the airline's closing share price on Friday, Southwest said in a statement."

Unfortunately, I think there may be some foul play here pre-takeover announcement. Jeff Kearns from Bloomberg alerted me to this and has already posted an article.

First, we can look to the OI chart for the Nov 5 calls (click to enlarge).



That pop came on 9-23-2010 (so the trades were 9-22-2010), 750+ of them. The company averages ~270 calls in total, so 750+ on one line in Nov where the total OI on all strikes was just 5 (five) is "unusual." I've included the Options Tab and below that the Time & Sales tab for 9-22-2010 in the Nov 5 calls (click to enlarge).






That doesn't look like an accident, just sayin'. An ~$11,000 purchase turns into ~$175,000 in 5 days on several times daily average volume... Boo...


This is trade analysis, not a recommendation.

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