Trading in Dow options surges before bid

Discussion in 'Wall St. News' started by S2007S, May 3, 2007.

  1. S2007S


    Trading in Dow options surges before bid
    From Bloomberg News
    May 2, 2007

    Trading in options to buy shares of Dow Jones & Co. surged to an 18-month high Monday, indicating that word of News Corp.'s $5-billion bid for the company may have leaked in advance of Tuesday's announcement.

    "Somebody knew this deal was coming," said Jon Najarian, co-founder of, a Chicago-based provider of financial data on unusual trading. "I don't think there's any such thing as coincidences on Wall Street."

    Until last week, no more than 728 call-option contracts on Dow Jones shares had traded in a single day in April. Trading shot up to 3,029 contracts April 25, then to 4,335 on Monday. Investors who bought the most active contract Monday could have sold it Tuesday for 48 times more.

    The Dow Jones trades are another example of a high volume of options bets preceding market-moving events. Similar increases came before the $31-billion offer for TXU Corp. in February and announcements in April by Mirant Corp. and MedImmune Inc. that they would consider takeover offers.

    The Securities and Exchange Commission in March froze more than $5.3 million in profits from suspected insider trading of TXU stock options. SEC spokesman John Nester declined to comment on Monday's options trading and spokesmen for News Corp. and Dow Jones didn't immediately return calls.

    Call options give investors the right, without the obligation, to buy shares of a company at a specified price by a certain date.

    The most active Dow Jones contracts Monday were call options conferring the right to buy shares for $45 by Sept. 21. With the stock fetching less than $37, the options traded for just 30 cents to 40 cents each.

    Tuesday, after Dow Jones disclosed News Corp.'s bid, the same contracts skyrocketed as high as $14.50 and closed at $12.
  2. Those fucking idiots at the SEC let most of this shit's disgusting. The manipulation that goes unchallenged vs. the manipulation that does end with some sort of penal action must be 500 to 1.

    The SEC is a useless organization if they continue to operate the way they have been.
  3. I want a job w/ the SEC, so I can join them in taking bribes from the hedge funds.