Friday, October 24, 2014

* Digital River (DRIV) - Cheater? How to Make 1000% in Two-weeks.


Share on StockTwits




DRIV is trading $25.56, up 47% with IV30™ down 79%. The Symbol Summary is included below.

Provided by Livevol

Conclusion
DRIV is up 50% today on an announcement the firm will taken private for $26 / share.  The option activity prior to the takeover looks suspicious and frankly, a little bit too lucky.

Is it possible that all of the trades were a coincidence? Yes.
Do I think this was a coincidence: No.

Let's turn to the details and you can decide for yourself.



First, we can see the Stats Tab which shows us that DRIV averaged 542 calls traded per day across all months and all strikes.  If we take out the two days I am focusing on, that average falls to 430. Remember that number.

Provided by Livevol

On October 8th, 4,337 Nov. 18 calls traded for ~$0.75 on zero open interest, leading to 4,291 new long positions.  Again, the total daily average across all strikes and all months was 430.

Provided by Livevol


On October 9th (the next day), another 3,643 Nov. 18 calls traded for ~$0.75.  The next day there were 7,268 open long positions on that line alone.

Provided by Livevol


Fast forward to today... Those Nov. 18 calls are now worth ~$7.60 and the open interest (the long positions) are still there.

Provided by Livevol


So what do we have?...

Two consecutive days of trading saw 9x the total daily average volume in calls in a single strike that were bought for ~$0.75 and are now worth $7.50.

Easy enough, that's 1000% in two weeks or a $540,000 bet turned into $5.4 million.

Those were facts.  This is an opinion.

Is it possible that all of the trades were a coincidence? Yes.
Do I think this was a coincidence: 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.

6 comments:

  1. 10,000% or 1,000%??

    ReplyDelete
  2. Ophir, does LiveVol have a screener that would allow simpletons such as myself to join in the "luck"?

    ReplyDelete
  3. They do. Email Livevol, give the my name. They'll show you the scanner... it's pretty awesome.

    ReplyDelete
  4. Should be 5400 into 54000 I think? 1000% is 10 times

    ReplyDelete
    Replies
    1. I butchered that entire calculation. Here it is:

      1000% in two weeks or a $540,000 bet turned into $5.4 million.

      Delete