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IRF is trading $39.10, up 47.2%. The Symbol Summary is included below.
Provided by Livevol
The news is easy enough:
Infineon agrees to buy Int'l Rectifier for $3 billion in cash via Reuters.
Conclusion
The option trading ahead of the takeover is suspicious and may point to the illegal use of inside information to profit from the news.
Let's start simple, with the Stats Tab.
Provided by Livevol
Fact #1: IRF averages 53 calls traded a day over the last three-months.
Fact #2: The average total open interest (all open option positions across all strikes and all months both calls and puts) is 1,198.
Now, let's turn to the options Tab from today.
Provided by Livevol
I have highlighted in yellow the open interest (open positions) in the calls for all months for IRF. Note that a blank is a 0 (zero).
As we can see, one line in particular looks a little different than the rest... and by a little, I mean, a lot. the Sep 30 calls are now worth $9.10.
So what happened in those Sep 30 calls? Well, here's a snapshot of the Options Tab on 7-1-2014.
Provided by Livevol
Note that 471 Sep 30 calls traded that day which is ~900% the totail daily average call volume.
For the record, one put traded that day (a single contract) and 9 other call contacts traded, and that's it. So basically, everything was in the Sep 30 calls... random?...
Let's fast forward to Aug 14th and the Time & Sales tab.
Provided by Livevol
Note that 829 Sep 30 calls traded that day, which is ~1,400% the total daily average call volume. We can see the largest trade (a 379 lot) went up for $0.30, but... it went up on the bid... So it was a sale, right?...
Wrong...
Here is the level II pricing at the time of the trade.
Provided by Livevol
We can see that the options were priced at $0.00 x $0.35 and someone came in with a $0.30 bid. They saved $0.05 from lifting the offer, and also flew 'under the radar' as the tape showed a trade on the bid.
But, obviously this was buyer initiated. A tricky buyer...
In all, ~900 calls were purchased since July 1st for ~ $0.30. Those calls are now worth $9.10.
Profit: 900 x 100 x ($9.10 -$0.30) = $792,000 on a $27K bet or a 2830% gain in six-weeks.
- Is it possible this was a coincide? Yes.
- Do I think it was? No.
This is trade analysis, not a recommendation.
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