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July 10, 2013
Good Fortune Smiles On Someone's Onyx Option Trades
This will be interesting to follow: the recent offer by Amgen for Onyx Pharmaceuticals (which happened while I was traveling, and didn't get a chance to write about) has had a financial sidelight: someone got very, very lucky with some nearly-expired call options.
On Thursday and Friday, traders enacted a few small-sized trades on Onyx call options - which give the buyer the right to buy the stock at a given price by a certain date - hoping to catch a share price rally by mid-July.
Onyx averaged 715 calls per day over the past 22 trading days, according to options analytics firm Trade Alert.
Call volume was notable on Friday, when a total of 1,561 calls changed hands, more than double the normal level, against 488 puts. On Thursday, traders exchanged 1,374 calls and 664 puts on Onyx, data from Trade Alert showed.
"This flow looks a bit suspect to me. It's possible the buyers knew of the deal and put that knowledge to work," said Trade Alert President Henry Schwartz. "The odds of turning a few hundred thousand dollars into millions overnight are very small, yet that's exactly what happened in Onyx options last week."
Specifically, some of these were July call options, worth a dollar or two on the Friday before the announcement, which started off Monday at about $30. That's just the sort of thing that speculative options traders dream about, and it's also just the sort of trade that the SEC likes to investigate. I wish good luck to whoever it is that has to explain this activity; they're going to need it in order to persuade anyone that good luck was all that was involved.
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