Monday, September 27, 2010

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

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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  1. Think u guys are reaching on this one. 700 contracts? 7k maybe. Forget the last one u and Jeff put out about "cheaters". That one was justified.

  2. You may be right... Feels too lucky though.

  3. Like ur stuff. respond occasionally. In the same line of work.

  4. Thats how the cashier steals right? A few 20's at a time. If they emptied the register then, well that is just plain ballsy.

  5. I fall into your court, BB. Small makes it almost more suspicious.

  6. U see this from last night? Looks familiar!

  7. Yeah, that was a snippet from Jeff's article. They cut out my quote on the shorter version, lol.