Tuesday, June 7, 2011

Temple-Inland (TIN) - Knowing Trading Ahead of Hostile Takeover Bid

TIN is trading $29.38, up 39.8% on a takeover with IV30™ down 31.3%. The LIVEVOL® Pro Summary is below.


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Temple-Inland Inc. manufactures corrugated packaging and building products, which the Company considers as two separate operating segments.

So, here's the news:
Temple-Inland Inc.’s shares soared 40% a day after International Paper Co. made a $3.31 billion hostile bid for the maker of corrugated packaging and building products.
Source: MarketWatch, by Kate Gibson and William Spain

DealB%k further wrote that:
Temple-Inland said on Tuesday that it had instituted a shareholder rights plan in its effort to fend off an unsolicited $3.3 billion takeover bid by International Paper.
Source: DealB%k, by MICHAEL J. DE LA MERCED

What I'm writing about though is some order flow that looks a bit... lucky?...
First, let's look to some stats. Even including some massive order flow on May 25th, the last 60 days have averaged 663 total calls traded a day, and 1,290 total options. A small snippet of the Stats Tab is included below.

Now, let's look to the Options Tab today and Day's biggest trades snap on May 25th (below).

While the company was averaging about 500 calls a day, 6,425 Jan'12 25/30 call spreads were bought for $0.90 (that's 12,850 total calls in a single print). That $0.90 call spread is now worth ~$3.30.

So a trade that equalled ~1,000% of total daily average volume and ~2,000% in the daily average volume of calls makes $1.5MM in two weeks. Nice trade... right?...

PnL Calc
6,425*100*($3.30 - $0.90) = $1,542,000

This is trade analysis, not a recommendation.

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  1. The more you post these kind of suspect trades, which I agree are totally shady as hell, the more I begin to think... could it be that the lack of prosecution from these trades means that these are indeed legit trades. Wouldnt it look terrific if the SEC can make the news about prosecuting insiders, surely they look in to these things?

    I used to think 100% fraud when I saw these trades, but now I am starting to think that this stuff is just way to blatant.

  2. people who steal like that should be shot.

  3. "Obvious" phenomena in life which aren't then obviously acted on tend to only be obvious to those without full knowledge, and tend to be anything but obvious to those that do. So, in a sense, I agree with you... sort of ;-)

  4. Isn't 1.50 minus 40cents a price of $1.10 on the spread?

  5. It is, you're right.

  6. You may be right. Large trades happen all the time that don't seem to pan out. Maybe some of these are just people getting lucky?