TAM - Foul Play by Insider in Takeover?

Discussion in 'Options' started by livevol_ophir, Aug 16, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    TAM is trading $21.70, up 30% on takeover news.

    <img src="http://1.bp.blogspot.com/_hMry1m7UF10/TGliyaqgyAI/AAAAAAAAEHM/81Ms4nBJ5B4/s1600/tam_summary.gif">

    I perused the options trade from Friday (the trading pre-announcement), and was surprised what I found. First, let's look at "average" behavior for the stock. A snippet of the Stats Tab is included (<a href="http://livevol.blogspot.com/2010/08/tam.html">in the article</a>).

    So the company averages 107 contracts traded a day; of which 65 are calls. Here's where it gets fishy. I took a look at the Time & Sales for Friday; all option trades >= 25 lot. The results are below (<a href="http://livevol.blogspot.com/2010/08/tam.html">in the article</a>).

    What do you know - there were 11 trades and each trade was the Aug 17.5 calls. In total, 760 traded. Granted this isn't a huge trade, but keep in mind, the average across all strikes is 65, so 760 is ~ 1,200% the average.

    The 760 calls bought for an average price of $0.30 are now worth $4.25 in parity. That's 1,317% gain in one weekend or just over $300,000 on a $22,800 bet. Hmmm...

    Details, trades, prices here:
  2. d08


    That's Southern America for you, what did you expect? There is a reason why most of these developing nation instruments are traded thinly.
  3. livevol_ophir

    livevol_ophir ET Sponsor

    We see it enough in American companies to make it less about the country and more about the people who do this stuff.
  4. Ohh please dont disrespect the United States like this. The level of corruption and fraud is much more sophisticated than Brazil.
  5. livevol_ophir

    livevol_ophir ET Sponsor

    lol; well said.
  6. Dustin


    Were these trades prior to 3:13p est on Friday?
  7. livevol_ophir

    livevol_ophir ET Sponsor

    right after.
  8. Dustin


    Ok then I wouldn't call that insider trading...anyone with a volume alert could have got those.
  9. livevol_ophir

    livevol_ophir ET Sponsor

    could be... or it is an insider that waited for that moment... either way, interesting order flow...
  10. Casey30


    If you were watching the news there was a headline at 3:14-15PM on Bloomberg. The options trades your referencing weren't till 3:21 PM and thereafter. I was able to buy some as late as 3:24PM. So I wouldn't always assume foul play on these things. It was y a slow Friday, so it didn't move right away on the news. Also, no one knew the price immediately either so it was still a gamble.
    #10     Aug 16, 2010