HAR - Huge Drop on Earnings - Someone Knew?

Discussion in 'Trading' started by livevol_ophir, Apr 29, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    HAR is trading 41.19 down more than $10 off of earnings.

    <img src="http://4.bp.blogspot.com/_hMry1m7UF10/S9mgQxbJFDI/AAAAAAAACH4/j_Q1GU3M6Js/s1600/har_summary.gif">

    The daily averages for option volume are included (<a href="http://livevol.blogspot.com/2010/04/har.html">in the article </a>).

    I hate to do this twice in one day, but...

    Yesterday the company traded 3,631 options - which makes sense as it was the day before earnings... But, check this out (<a href="http://livevol.blogspot.com/2010/04/har.html">in the article </a> the Time & Sales).

    Starting 15 minutes from the close 2,531 puts were purchased. That's 5x daily average put volume and even for the day of earnings - it was more than double the prior 6 hours trading.

    The May 50 puts jumped from OI of just 311 to 2,123 yesterday. You can see the Level 2 snap (in the article) - blue is the Open Interest.

    The Optins Tab snap illustrates that the May 50 puts OI is the largest in the entire chain - and it accumulated in one day (<a href="http://livevol.blogspot.com/2010/04/har.html">in the article </a>).

    Note also that the Mar 42.5 and 37.5 puts are the other largest open interest lines. Feels like someone knew that bad news was on the horizon... Or not?...

    This is trade analysis, not a recommendation.

    Details, trades, prices, charts here:
  2. hughb


    Hi livevol, I don't think I've seen you here before, have you been on board long? Thanks for being a sponsor.

    HAR jumped out at me tonight when I was updating my daily diary so I looked in here to see if anyone was talking about it, looks like you are the only one so far. If your volume figures are correct, then yep, somebody knew.

    Options traders are both the smartest and dumbest guys in the room. Whoever those put buyers were yesterday were the smartest.
  3. Most of the time insiders buying insurance on their long stock.
  4. livevol_ophir

    livevol_ophir ET Sponsor

    Very true - but insiders don't buy insurance with 4 minutes to go before the close.
  5. livevol_ophir

    livevol_ophir ET Sponsor

    Hi hughb... I have 6 of the most recent 20 posts in Options... Been here for a while - I post to "trades" when it's a bit more general.
  6. zdreg


    why not?
    there are very few people who would like to be examined for an egregious trade which miight look like the misuse of inside of info.
  7. livevol_ophir

    livevol_ophir ET Sponsor

    Insiders plan securities sales/purchass ahead of time and space them out equally throughout a period to defend their moves as "non-reactive." In other words, the trades are done in an interval that is wide enough to hopefully eliminate a pre-supposition that it was done on one specific piece of news.

    What's more suspicious:

    (1) Insider accumulates 3000 puts to cover his 300,000 shares of stock over a 3 week period into earnings with a schedule put forth to do so for each of the 4 earnings a year. The schedule was determined three years ago.


    (2) Insider accumulates 3000 puts to cover his 300,000 shares 4 minutes before the close of a horrific report.

    You see the trouble with (2) is that it's reactive - an insider would know if the report is bad news and react to it. If theput purchase is just normal activity - and infact it was decided years prior - then it's not reactive, it's methodological.
  8. zdreg


    #1 is irrelevant. because it is obviously not insider trading
    #2 is unlikely to be the result of inside info unless u are looking for trouble. if u are long why not just sell the position?
  9. livevol_ophir

    livevol_ophir ET Sponsor

    I guess my claim is that #1 is the standard - that's why I believe it to be relevant. But #2 happened.
  10. livevol_ophir

    livevol_ophir ET Sponsor

    Then again... I have a tendency to get kinda suspicous ... or really, overly suspicious is the right description. My background is in quant modeling for fraud so it stuck... :confused: :cool:
    #10     Apr 30, 2010