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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8 comments:

  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.

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

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

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  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.

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

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

    http://www.chron.com/disp/story.mpl/business/7221019.html

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

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