Maybe we should rename this section the "Insider Trading Zone" and get a little more action. – Ilene
$1.5 Million In Blatant Insider Trading Profit Following 3Com Acquisition (Or An Innocent Calendar Spread)
Courtesy of Tyler Durden at Zero Hedge
3Com’s acquisition by Hewlett Packard for $7.90/share after the close today came as a surprise to many, but not all. Because someone bought 3 times the open interest in November $5 calls and 15 times the open interest of the December calls. In summary: 3,961 Nov $5 calls were purchased today (964 open interest) for $0.65, as were 3,269 December $5 Calls (210 open interest) for $0.85. The profit, assuming the insider action was by one entity, is about $870,000 on the Novembers and $650,000 on the December strikes, for a not too shabby illegal daily P&L of $1.5 million. This is so blatant it is sufficiently stupid that even the SEC will presumably catch the perpetrator. Here’s to hoping the trader ends up being Galleon’s Raj Raj buying options from his E-Trade account while on bail. Of course, we fully expect any prosecution case against the perpetrator to fall apart at the seams courtesy of a completely inept legal team at the SEC and the Justice Department.
The chart below summarizes the trading action in COMS $5 near term calls.
And here one can see what a blazing outlier today’s volume action was in December $5 calls.
h/t ever vigilant momo chaser C-Mac
*****
Zero Hedge later issued the following report on the squidy tentacled Goldman Sachs’ possible involvement.
Goldman And The 3Com "Insider Trading" Connection
Courtesy of Tyler Durden
Following up on our earlier disclosure about potential insider trading in 3Com stock, we have uncovered something interesting. Did Goldman (in)advertently tip off clients that 3Com was potentially in strategic negotiations? 3Com was previously supposed to present at Goldman’s Data Center Techtonics Conference today at the Sheraton Hotel in New York (Agenda below). In a limited distribution note, Goldman yesterday advised selected clients that 3Com had withdrawn at the last minute from the Conference. As those in the industry are well aware, any last minute switches of this kind are indicative of imminent good or bad news dissemination, and more often than not are associated with some strategic announcement.
While the person buying the calls (if indeed this was not a calendar spread) may have been provoked to do so as a hedge against anything crazy out of the firm, it is amusing that once again a very selectively disseminated piece of information to only Goldman clients may have been the driving reason for making markets "efficient."
