4 ms·

Guaranteed this is insider trading if its a small time investor.. I've traded plenty of options, and no small time guy would buy more than $135k at 160 strike w

by xt00 10y ago

Guaranteed this is insider trading if its a small time investor.. I've traded plenty of options, and no small time guy would buy more than $135k at 160 strike when closing price was 131 and the price of the stock for the past few months went as low as $100 -- and a time window of 2 months until the option expires?? Extremely risky trade.. very very likely you would lose all of that $135k.. the most common thing with options that close in like 2-3 months is that the stock just stays close to the same value, so you wait a little while and the stock doesn't go anywhere up or down, so you just have to sell your options at a loss.. but as that window of time closes to a few weeks and you are way out of the money like 160 vs. 131, then your ability to sell that option gets worse and worse until finally you sell it at like a 75% loss. The 175 strike option is even more ridiculous.. 175 on 131... man.. extremely extremely speculative... unless those traders have a history of making really risky bets like that, then they are almost assuredly in the know of what was going to happen. My bet is that they either live near Microsoft or Linked in locations (Seattle or SV).. Also the reason they placed the bid in the last 5 minutes of trading is that there are various auto-traders out there that chase this kind of action.. if they see really unusual buying of out of money options (extremely risky), then they buy a little too thinking that somebody must know something and they profit also.. so if they bought these in the last 5 minutes of trading, then its possible the algorithm might not pick up on the trend so it reduces the number of people jumping in blindly into the trade.. so they make the spike smaller, but also isolate themselves.. extremely risky.. so I think somebody is giving that money back that they made....

exabrial 10y ago
Good analysis, not sure why you got down voted by the hn police
busterarm 10y ago
My boss is a former SEC investigator. We talk about this kind of trade a lot. Either somebody hit the lottery or this trade is crooked as hell.
- solotronics 10y ago
  I am genuinely curious how its possible to keep track of 'insider trading'. There is always information asymmetry and people will make decisions on that info, thats the entire premise of the market.
  - busterarm 10y ago
    People with inside knowledge use leveraged trades (options) to maximize their gains. The volume of options traded is way lower than you probably imagine. Most options trades are fairly standard things -- it's mostly pattern recognition. And they're still doing this with really old tech (I hope you enjoy AS400s) and spreadsheets because there's no willpower to investigate these things for real. You could use modern computers and tools to do a lot of the job and spot patterns (the kind of stuff Nanex likes to do) and bring them to the intention of investigators but they don't do that. It's old school investigative work otherwise and most criminals are super dumb. Like all of a sudden a housekeeper in Romania is trading several hundred thousand in options the day before some news...
    - toomuchtodo 10y ago
      Really shocked the SEC doesn't cut Nanex/Eric a check to provide this sort of data directly to them.
      - busterarm 10y ago
        Really though? SEC and FINRA are cush jobs. If you play politics and make it high enough you can golden parachute out of there. There isn't the political will to give these agencies any real teeth. They go after the low hanging fruit because it's easy and won't make waves. It's practically their mandate. Catch idiots and keep the mafia stuck in OTC and it's a job well done. It's like civil service but with better pay and zero accountability. Everything's fine, nothing to see here.
        toomuchtodo 10y ago
mathattack 10y ago
Looks very clearly like insider trading. It's obvious that the SEC will get involved, so why will someone be so stupid?
- ryanlol 10y ago
  It's not very clear though, the investor could've just as well overheard a conversation. If they didn't commit a crime, why should they be scared of the SEC?
  - mathattack 10y ago
    If you overhear and know it's inside information it's still illegal to trade on it. And if you have a loophole they will still drag you through the mud.
ChuckMcM 10y ago
Absolutely. Someone knew and the advertised that fact in the stupidest way possible. That person is going to find themselves with some explaining to do, and they are probably going to end up paying a fine. My guess is that the information will be at most one hop away from the trader.
- deleted 10y ago
  [deleted]
misja111 10y ago
According to traders who were cited in the article, the calls were part of an iron condor. An iron condor is an option strategy where you buy and short several options at once, and which speculates on LOW volatility. The 160 OTM call just happened to be the most profitable part of the strategy, but you shouldn't look at it in isolation from the other components. Cited from theoptionsguide.com: "The iron condor is a limited risk, non-directional option trading strategy that is designed to have a large probability of earning a small limited profit when the underlying security is perceived to have low volatility. The iron condor strategy can also be visualized as a combination of a bull put spread and a bear call spread. Iron Condor Construction Sell 1 OTM Put Buy 1 OTM Put (Lower Strike) Sell 1 OTM Call Buy 1 OTM Call (Higher Strike)"
- sportanova 10y ago
  linkedin hasn't been a good candidate for low volatility. always possible that they thought it wouldn't move, but there are much less volatile stocks out there

by xt00 10y ago

exabrial 10y ago

Good analysis, not sure why you got down voted by the hn police

busterarm 10y ago

My boss is a former SEC investigator. We talk about this kind of trade a lot. Either somebody hit the lottery or this trade is crooked as hell.

solotronics 10y ago
I am genuinely curious how its possible to keep track of 'insider trading'. There is always information asymmetry and people will make decisions on that info, thats the entire premise of the market.
- busterarm 10y ago
  People with inside knowledge use leveraged trades (options) to maximize their gains. The volume of options traded is way lower than you probably imagine. Most options trades are fairly standard things -- it's mostly pattern recognition. And they're still doing this with really old tech (I hope you enjoy AS400s) and spreadsheets because there's no willpower to investigate these things for real. You could use modern computers and tools to do a lot of the job and spot patterns (the kind of stuff Nanex likes to do) and bring them to the intention of investigators but they don't do that. It's old school investigative work otherwise and most criminals are super dumb. Like all of a sudden a housekeeper in Romania is trading several hundred thousand in options the day before some news...
  - toomuchtodo 10y ago
    Really shocked the SEC doesn't cut Nanex/Eric a check to provide this sort of data directly to them.
    - busterarm 10y ago
      Really though? SEC and FINRA are cush jobs. If you play politics and make it high enough you can golden parachute out of there. There isn't the political will to give these agencies any real teeth. They go after the low hanging fruit because it's easy and won't make waves. It's practically their mandate. Catch idiots and keep the mafia stuck in OTC and it's a job well done. It's like civil service but with better pay and zero accountability. Everything's fine, nothing to see here.
      - toomuchtodo 10y ago

mathattack 10y ago

Looks very clearly like insider trading. It's obvious that the SEC will get involved, so why will someone be so stupid?

ryanlol 10y ago
It's not very clear though, the investor could've just as well overheard a conversation. If they didn't commit a crime, why should they be scared of the SEC?
- mathattack 10y ago
  If you overhear and know it's inside information it's still illegal to trade on it. And if you have a loophole they will still drag you through the mud.

ChuckMcM 10y ago

Absolutely. Someone knew and the advertised that fact in the stupidest way possible. That person is going to find themselves with some explaining to do, and they are probably going to end up paying a fine. My guess is that the information will be at most one hop away from the trader.

deleted 10y ago
[deleted]

misja111 10y ago

According to traders who were cited in the article, the calls were part of an iron condor. An iron condor is an option strategy where you buy and short several options at once, and which speculates on LOW volatility. The 160 OTM call just happened to be the most profitable part of the strategy, but you shouldn't look at it in isolation from the other components. Cited from theoptionsguide.com: "The iron condor is a limited risk, non-directional option trading strategy that is designed to have a large probability of earning a small limited profit when the underlying security is perceived to have low volatility. The iron condor strategy can also be visualized as a combination of a bull put spread and a bear call spread. Iron Condor Construction Sell 1 OTM Put Buy 1 OTM Put (Lower Strike) Sell 1 OTM Call Buy 1 OTM Call (Higher Strike)"

sportanova 10y ago
linkedin hasn't been a good candidate for low volatility. always possible that they thought it wouldn't move, but there are much less volatile stocks out there