SEC looking at suspicious option trading before rumor of Samsung-BlackBerry talks was reported
Call options are financial instruments that allow the buyer to purchase 100 shares of stock in a company for a set price during a specified period. On January 14th, just hours before Reuters moved the rumor on its wire, someone purchased 2000 BlackBerry January 10 calls giving them the right to purchase 200,000 shares of BlackBerry for the price of $10 before they expired on January 23rd. The very risky investment was purchased at a price of 10 cents each ($20,000) and later hit a high of $2.55. At that price, the calls could have been sold at $510,000 for a nifty profit of $490,000. However, it is unclear whether the buyer of the options cashed out with such a huge gain.
After the market closed, Samsung denied that it was talking to BlackBerry and the shares opened down over $2 at $10.36 the next morning, never trading higher than $10.71 the whole day. That would have given the option buyer a chance to turn a $20,000 to $120,000 profit on his calls. If the investor held on until the option's last trading day, he could have sold the calls for approximately 70 cents giving him a $120,000 profit.
The report by Reuters stated that Samsung was planning to purchase BlackBerry for a price between $13.35 to $15.49. That represented a premium of 38% to 60% over BlackBerry's trading price at the time. The SEC is investigating whether the source of Reuters' story purchased the calls. Reuters stressed in a report on Sunday that it is not a target of the Agency's probe. Because there were only six trading days left until the calls expired, and with BlackBerry trading for less than the $10 exercise price, only someone certain of a quick price rise in BlackBerry's stock would have purchased $20,000 worth of the calls in question on the afternoon of January 14th.
Posts: 31760; Member since: Feb 05, 2011
posted on Feb 08, 2015, 11:25 AM 0
posted on Feb 08, 2015, 12:58 PM 1
PhoneArena Comments Rules
A discussion is a place, where people can voice their opinion, no matter if it is positive, neutral or negative. However, when posting, one must stay true to the topic, and not just share some random thoughts, which are not directly related to the matter.
Things that are NOT allowed:
- Off-topic talk - you must stick to the subject of discussion
- Trolling - see a description
- Flame wars
- Offensive, hate speech - if you want to say something, say it politely
- Spam/Advertisements - these posts are deleted
- Multiple accounts - one person can have only one account
- Impersonations and offensive nicknames - these accounts get banned
Moderation is done by humans. We try to be as objective as possible and moderate with zero bias. If you think a post should be moderated - please, report it.
Have a question about the rules or why you have been moderated/limited/banned? Please, contact us.
Send a warning to post author
Send a warning to Selected user.
The user has 0 warnings currently.
Next warning will result in ban!
Ban user and delete all posts
Message to PhoneArena moderator (optional):