with that chart and volatility, who would have the guts to buy 500 weekly calls, will be expired in two days? Sodastream trader makes 3,000% profit in two hours Alex Rosenberg | @CNBCAlex 8 Hours AgoCNBC.com 1.0K SHARES Was it skill, dumb luckâor something more sinister? That's what traders are asking about a big, longshot bet on Sodastream that returned some 3,000 percent in just two hours. Two minutes before 10 a.m. ET on Thursday, one options trader bought 500 weekly 30-strike calls in Sodastream for 15 cents each (or $15 per contract, given that each contract controls 100 shares) that expire Friday. It was by far the biggest Sodastream trade of the day in terms of the number of contracts. The purchase gives the trader the right to buy Sodastream shares for $30 at the close of Friday trading. The reason those options were so inexpensive is that the stock was trading at about $29.50 at the time, meaning the chance of the stock closing Friday above $30 was considered to be especially low. But then, shortly before noon, Bloomberg reported that the company is in talks with an investment firm about taking the company private. After a halt, the stock sailed as high as $36. The news created an instant windfall for the trader, as these options, which were bought for $7,500, became worth as much as $250,000. Read More SodaStream reportedly in talks to go private, shares spike "Prior to the halt, calls had already traded more than two times their average daily volume," commented Dan Nathan of RiskReversal.com. "The fact that the most active option of the day was an out-of-the-money call that expired tomorrow suggests someone knew something, as there were no scheduled events." The trade, which could end up drawing insider-trading-related scrutiny, joins other recent suspicious options trades, such as the "fishy" action in Puma Biotechnology ahead of that company's announcement of positive test results. Read More Najarian: 'Fishy' options trade ahead of Puma news Correction: This article has been updated to reflect the reason the Sodastream call options were so inexpensive. âBy CNBC's Alex Rosenberg
? may I buy you a clue ? The score was not made on a 50 cent or $1 move but a $6 move. Unless the person buying those options is in the habit of making $7000 bets on a whim, they will take the money away, if they can. Do I have to do all the heavy lifting here?
May I invite you to reread the article carefully? It clearly says and I quote: "...the chance of the stock closing Friday above $30 was considered to be especially low" This statement does not make any sense of course, because once again there is absolutely nothing unusual about a stock moving (less than) 2% in one day (in this case going from $29.50 to $30). If the stock was selling for $10 and the trader bought tons of call options with a $20 strike price and a 24 hour expiration date then yes, this would immediately attract some serious scrutiny. But a 50 cent move, come on. I mean who write these stupid articles? I know, but that's not the issue here.
Ok, not so unusual. But it's not .50, it's .65 (.50 + .15) to break even, so 30.15. But a move of $6 (about 20%) on a $29.50 stock is really impressive. I dunno. I probably would not have bet $7500 on options that expire tomorrow unless $7500 is not much to me, or I feel incredibly lucky, or I knew something,
Granted. But on any given day you can always find plenty of daily 20 to 50% moves. Here are the biggest gainers in percentage just for today, for example: http://www.thestreet.com/markets/gainers.html
True. But then I guess the trick is to figure that out before hand Strange, at the bottom of the article we read "Correction: This article has been updated to reflect the reason the Sodastream call options were so inexpensive." I don't think .15 for contracts that expire tomorrow is "inexpensive". On the contrary.
In any event, I think it would certainly make sense for the SEC to figure out exactly who it was who made those trades, and what connection they might have to executives, law firms, etc. involved in the potential deal.
Exactly. Those that never tried to actually trade something like this think its like 50/50 or some bullshit. Maybe Sosnoff can help them Bottom line, if this was an atypical trade for that owner, then the SEC will be on him like white on rice