Good article from Reuters, well worth a weekend read: Insight: When options trading ahead of deals raises eyebrows
A study for Reuters by options research firm Schaeffer’s Investment Research of 181 such announcements in the 14 months to the end of February shows … 41 examples of companies, or 23 percent of the sample, where the volume of new call options positions (rose) by at least 50 percent in the five days before the news when compared with the average of the previous six months. For 33 of these companies, the volume more than doubled.
Option activity ahead of a big announcement isn’t always trading on inside information, there are other explanations, but the numbers do raise eyebrows, at the very least.
This sort of thing would never happen in the FX markets (where’s that rolly-eye, sardonic emoticon?)
