Wednesday, July 31, 2013

And Speaking of Insider Trading, Did You Hear One About The Trader Who Didn’t Let The Tipster Finish What He Was Saying?


 Last night before the close I received an instant message passing along mention of “an incredibly unusual trade” in the options of Booz Allen Hamilton, ticker BAH—better known as the home of government secrets-discloser Edward Snowden.
 Seemed that somebody had bought 7,600 worth of call options (equivalent to 760,000 shares of stock) in BAH, which normally trades fewer than 20 options on any given day.
 Specifically, the buyer bought 7,600 worth of September $20 calls (the stock closed the day at $19.32) for 85 cents.  “This name has LESS than 1,000 in total open interest,” my messenger noted—meaning the buyer had just bought 7.6-times the number of existing options of all stripes extant in BAH.
 That, as I say, was last night, not long before the market closed for trading.
 This morning, lo and behold, the Wall Street Journal is reporting the following:

 Accenture in Talks to Buy Booz & Co.

An Acquisition Would Beef Up Strategy and Operations Consulting

 Unfortunately for the massive call option buyer in BAH, “Booz & Company” is entirely different from “Booz Allen Hamilton,” having been spun out some years ago as a private company.
 Or, perhaps it’s highly fortunate that our option buyer didn’t finish listening to his (or her) tipster before hanging up the phone and placing the order.
 Because if indeed Accenture was in talks with “Booz Allen Hamilton,” Mr. 7,600 September 20 BAH Calls might be getting a call of a different kind right about now, and it would not be pleasant.
 As it is, the buyer—who, to be fair, could have had any number of reasons to make the trade (might have been a short-seller looking to hedge a position prior to the company’s earnings report this morning, for example)—can finish reading the Wall Street Journal without interruption.

Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2013)    $4.99 Kindle Version at Amazon.com

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The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  And if you think Mr. Matthews is kidding about that, he is not.  The content herein is intended solely for the entertainment of the reader, and the author.

2 comments:

John Hempton said...

That is special...

Anonymous said...

This is a clever post and name mix ups do occur (for example on ticker MCI when the company named MCI filed for bankruptcy. However, in this case as you mention BAH also was reporting earnings and the investment was profitable.