Wednesday, August 20, 2014

* Int'l Rectifier (IRF) - Did a Cheater Make 2800% on the Takeover?... I Think So... And It Was Hidden.

Share on StockTwits

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.

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?...


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.

Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

No comments:

Post a Comment