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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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July 25, 2013

Those Fortunate Onyx Option Traders

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Posted by Derek

Surprisingly, two people have come forward saying that they were among the people who bought options in Onyx Pharmaceuticals just before Amgen's bid for the company. This wildly profitable trade has attracted plenty of regulatory attention, and the SEC has already filed a civil lawsuit (and is hunting for defendants).

Dhia Jafar and Omar Nabulsi, both of Dubai, said a court-ordered freeze should be lifted on the $2.53 million profit that they made lawfully from buying Onyx call options in the last week of June, according to filings late Tuesday in U.S. District Court in Manhattan.

The defendants said that when they bought the call options, they had no material, non-public information that biotechnology company Amgen Inc was trying to buy its smaller rival for $10 billion, a hefty premium at the time.

Who knows? People do get lucky. And the fact that these two have come forward to defend their trades is unusual, and suggests that they think that they have a case to make. But I'll bet that not everyone who did that trade will be persuasive about their reasons.

Comments (4) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Dr K. on July 25, 2013 8:34 AM writes...

Trillions of dollars in options are traded daily, so it would be even more strange to expect that no options should be traded before any such event, unless the volume changed dramatically beyond the normal level of variance. Even then, filtering those who got lucky from those who cheated can be very difficult ... unless of course the NSA have been listening to your calls.

Permalink to Comment

2. newnickname on July 25, 2013 8:56 AM writes...

The [come forward] link to Reuters isn't working.

I want to know if these guys have a pattern of trading options and what that pattern is. Ah. I found one of the articles: "In Tuesday's filings, Jafar and Nabulsi called themselves frequent options traders who engage in speculative trading."

Well ... even with this and other headline items (insider trading charges filed against $15 B SAC Capital Advisers, etc.), there are knowledgeable people with Wall Street experience who report that these cases are just the tiniest tip of the iceberg. Wall Street is as corrupt as it gets.

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3. Hap on July 25, 2013 9:22 AM writes...

On the previous thread, someone else noted that at least some of the option trades probably were legitimate - if the difference in the total number of option trades for or against a stock is zero, then the 2:1 ratio of the questioned days had to be balanced by trades against the stock beforehand - maybe 4:5 for:against. That would imply that somewhat less than half of the trades for call options would have been expected in the absence of insider information.

Don't you need defendants first? Just because people made profits on trades that seem questionable doesn't mean they did something wrong - you need (or ought to need) actual evidence that they knew something they shouldn't, which would be tied to specific people.

Permalink to Comment

4. luysii on July 25, 2013 8:21 PM writes...

Not all in finance are corrupt. I told a family member, who has been interested in finance since grade school, that I had a tip for him on GSK. He told me not to tell him, as the institution he works for is extremely strict about these things. He relented when I told him it was my take on very public information -- e.g. the faked drug testing for GSK in China (not the bribery). I told him that I thought the cloud it cast would make it even harder for them to get any of their drugs through the FDA, as all their testing immediately became suspect (not just the Chinese work), and that this wouldn't be good for the stock.

Also he's honest and his advice for the past year has been incredibly good. He wanted me to buy Facebook 12/12 at 19. I didn't buy it then as I'd made as much as I wanted by April of last year, and being in the market gives me the yips. When Google and Apple were both around 700 earlier this year, he thought Apple would go down to 375, and Google would go up to 1000.

So there are people in finance who are l. honest 2. right far more often than they are wrong.

One tip for those of you salivating. He thinks XLS (currently at 15) might be at 75 in 5 years. Full disclosure -- I own some. It's already up nearly 50% in the past few months.

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