Maybe it was just one leg of an option spread. Selling ATM/Slightly OTM call and hedged with buying deep OTM.
Insider trade on Splunk acquisition?
41–50 of 371 posts
Re: Insider trade on Splunk acquisition?
#42Earlier quoted context omitted.
"short-dated out-of-the-money call options that cash out a day after a merger/acquisition" is, like, the definition of a suspicious transaction. Somebody's gonna get a knock on the door from the SEC.
But lottery-ticket options trading is done all the time. The fact that the options expire the next day is part of the strategy (because before that, the options cost more). $20k might sound like a big stake but you don't know the size of the trader's portfolio, it might be 0.01% of it, and they didn't stand to lose the whole thing necessarily.
All true in the abstract. But doing it the day before an acquisition is always gonna earn you a door knock, even if you're a serial gambler.
Re: Insider trade on Splunk acquisition?
#43Not defending anyone, just saying. - If I have $1000 I might choose to spend $2 for a gambling. - If the trader have $10M already, it might be reasonable for him/her to spend $20k gambling on some rumors. This guy could be someone who is already rich.
There is a 0% chance this is someone gambling. This is a 1000000 sigma event.
Re: Insider trade on Splunk acquisition?
#44Earlier quoted context omitted.
The SEC absolutely will be looking into this trade.
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Search for "insider trading convictions". They're not rare, and often result in jail time.
Are most of the inside traders that get caught non-professional investors, because the pros know how to escape detection? Are the convictions a small fraction of the number of crimes? Is the SEC too focused on crimes that are easy to prosecute and ignoring more important systemic issues? I'd say yes to all, but the SEC is far from toothless in this type of case.
Re: Insider trade on Splunk acquisition?
#45If everyone looks at a trade like this as prima facie evidence of insider trading, why are these options even for sale?
It is like a casino, except if you win the jackpot you get arrested. Because we run our economy under the law that requires stock prices to be set by ignorant people.
Re: Insider trade on Splunk acquisition?
#46Re: Insider trade on Splunk acquisition?
#47Re: Insider trade on Splunk acquisition?
#48If everyone looks at a trade like this as prima facie evidence of insider trading, why are these options even for sale? It is like a casino, except if you win the jackpot you get arrested. Because we run our economy under the law that requires stock prices to be set by ignorant people.
I think the suspicious thing is that these were bought right before the announcement of the acquisition. If they had bough the options at any other time and made money it would not be notable.
Re: Insider trade on Splunk acquisition?
#49Can someone explain the mechanics of this specific trade to a noob? The trader bought 550k options yesterday for SPLK to hit $127/share? Since that seemed highly unlikely they were only priced at $.04 each. but now that SPLK is at $145/share they are worth $18 each? so that would be a profit of ~$10m?
Re: Insider trade on Splunk acquisition?
#50Go directly to jail, do not pass go, do not collect $10M.
Unless they are a politician :/