Thursday, May 8, 2014

PowerSecure (POWR) - Stock Collapses 60%; But Someone Made 1400% in 7 Days. Cheater?

POWR is trading $7.10, down small 61.8% IV30™ up 17.9%. The Symbol Summary is included below.

Provided by Livevol

This note is going to come off as pretty negative and opinionated.  Just remember, my conclusion is just an opinion. It is not a fact.  Here we go:

(Older Research Post Here: Are Options Used to Cheat on Takeovers?)

The stock has imploded off of earnings news released this morning:
Over the three months to March, the company reported a net loss of 17 cents a share and revenue of $52.8 million. Analysts surveyed by Thomson Reuters expected profits of 2 cents a share and revenue of $59.33 million.

Source: via Yahoo! Finance: Why PowerSecure (POWR) Stock Is Plunging Today, written by Keris Alison Lahiff.

Here's the thing though... I think someone may have known ahead of time.  Here are facts, the conclusion is speculation.

A snippet of the Stats Tab for POWR is included below (last 90 calendar days)

Provided by Livevol

We can see the stock averages just 85 puts traded a day in total across all months and all strikes.

Let's turn to the options Tab on close of 5-1-2014 (one week ago).

Provided by Livevol

The stock closed at $21.30 and 1001 Jun 20 puts were purchased for $0.90.  No single trade was larger than 100 contracts, and there was just one of those.  Only one other was larger than 50 contracts (57 lot).  But, from 12:17pm EST to 12:44pm EST and from 10:13am EST to 10:14am EST, essentially all the volume came in. So, two very short periods of time, very small trades, paying $0.90.

Keep in mind that the open interest on that Jun 20 put line was 34, and 1001 traded.  That 1001 is ~12x the total daily average volume across all strikes and all months.

Now, let's turn to the options Tab as of today (5-8-2014):

Provided by Livevol

Hey!  What do ya know?  Those $0.90 puts were sold at $13.30.  And how many?... 1,003.  yeah... Basically the exact number that were bought.

Cost Basis: $90,000
Profit: 1,000 x 100 x ($13.30 - $0.90) = $1,240,000

So, a ~1400% gain in seven calendar days.

AS for the closing trades... Those were also small... Not a single one larger than 25 contracts.

Provided by Livevol

In terms of the stock move... Was this weird?...The Charts Tab (two-years) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Provided by Livevol

We can see the stock has hit lows not seen since Dec of 2012.

Is it possible this was just a $90,000 speculation with no impropriety at all?  Yes.

Do I think someone cheated? Yes.

This is trade analysis, not a recommendation.

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  1. I want to hear from the "lucky" soul. Hope they post a comment here, Ophir.

  2. wonder if someone will send this to SEC Enforcement Section....