A total of 998 of December $31 calls changed hands for 15 cents each at 10:19 a.m. New York time on Dec. 2, data sent to Bloomberg show. The shares, which hadn’t closed above $31 since June, jumped 52 percent to $39.79 when exchanges opened today. The calls, which expire Dec. 16, jumped 5,567 percent to $8.50 at the open, boosting the value of the investment to $848,300 from $14,970. Before Dec. 2, the December $31 calls had an average daily volume of 29 contracts over the prior 10 weeks.
“It looks to me like it’s more than just luck,” Henry Schwartz, president of Trade Alert, a New York-based provider of options-market data and analytics. “To see flow like that that in excess of the average daily volume and so close in front of a deal is either incredibly lucky timing or insider information.”
SAP, the largest business-management software maker, said Dec. 3 that it agreed to buy San Mateo, California-based SuccessFactors for $40 a share, or 52 percent more than the last close. Calls that give the right to buy stock at a set price and date offer higher returns to traders speculating on takeovers.
Most of the December $31 calls traded Dec. 2 changed hands at the ask price, which indicate that buyers of new bullish positions initiated the transactions. They helped boost the open interest for those options by 160 percent to 1,542 contracts.
“I find it very unusual that there was a volume spike in those out-of-the-money calls on the last business day before a deal was announced,” said Steve Sosnick, equity risk manager at Timber Hill LLC, the market-making unit of Interactive Brokers Group Inc. in Greenwich, Connecticut. “I would hope that someone is looking at this.”
Andrea Meyer, a spokeswoman for SuccessFactors, didn’t return calls seeking comment. Jim Dever, a spokesman for Walldorf, Germany-based SAP, and John Nester, a spokesman for the U.S. Securities and Exchange Commission, declined to comment. The SEC monitors the options market for potentially illegal insider trading.
“It looks to be some rather fortunate timing,” said Joe Kunkle, founder of OptionsHawk.com, a Boston-based provider of options-market analytics. “Putting on calls that far out of the money makes no sense, and there was was no other catalyst expected to move shares that big.”
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