Bought a few days right before google buys the 6.3% stake.perfectly timed right after dividends. Himx was approximately at $5.50@that time. So they got option on the cheap! My guess is who ever this is must have some insider info. Nobody makes a bet like that 8 months in advance, unless it was a sure bet! There is a article posted 7/23 or 7/28 talking about this unusual bet! I'll post article later!
Sentiment: Strong Buy
This might seem a noob question but here goes.
Why buy the option to purchase Himx at 19 in March if the person/fund was sure it would reach 19 by March? Just buying it at the time when the price was at 5.5 could have netted him/them a return of around 300% by March no(If it reaches 19 like they believe it would)?
To buy shares at $5.50 would cost $5.50. For the right to buy at $19 on the third Friday of March 2014 might have cost $0.05 or so. So, the options allows the buyer the right to control 110 times more shares for the same price.
Now, if the share go to $25.50, each share bought at $5.50 would net $20. The equivalent 110 shares bought at $0.05 with this same $5.50 would next 110 x ($25.50 - $19 - $0.05) = $709.50.
So, which would you prefer, the $20 or the $790.50?
Options give you leverage where you control more shares for the same money.
Of course, there is risk of these options expiring worthless if HIMX doesn't get over $19 by March 2014 but that person thought the risk was worth the potential reward.
My question is still why the $19's and only the $19's? Why not spread it out with some $17's and some $15's? The obvious answer is that the $17's and $15 would cost more so they would control fewer shares. So, why the $19's? This person must have felt it would be well over $19 and thus why he wanted to control as many shares as possible and thus wanted to buy as cheap as possible.
I hope this helps.
Can you confirm that these were all purchased at once, over a very short period of time or at least by one firm?
The March 2014 $19 call open interest is now 7,447 contracts or 744,700 shares with another 155 (15,500 shares) contacts trading today. You have to go back to the March $12's to find that sort of open interest. So, this was a large bet and target as there are strke prices at $21, $20, $19, $17, $16, $15, $14, $13, $12, $11, etc. (but no $18's). So, why the $19's. Had to be for the very low option price..............but also for the future expectation.
Note that if this entity had much doubt, they would have spread their options out and perhaps bought some of the $17's and $15's. But, the $17's have only 170 contracts of open interest.
Great find once again and thanks to yupengchiang for adding in what you know.
I'd like to see the article. It looks like the March, 2014 options started trading the same week as the Google announcement in July. So, what I did was go into my ETrade account and get the details for the March, 2014 $19 call options. Looking at the "Option Price and Open Interest" chart I see the first activity for the $19 strike as minimal open interest on Sept 20. Then there is open interest of 2K and above on Oct. 1, 2, 4 and 8.
I'm not sure how accurate the Open Interest value is on the chart, but if I'm reading it correctly, the vast majority of those options have been opened in the last week or so. If I'm reading that chart incorrectly, please let me know.
For the week of the Google announcement, the only article I see referencing options is an OptionMonster article, and there is no mention of the $19 calls:
"Himax Technologies continued to spike higher yesterday from the Google investment announced earlier this week, and option traders are looking for even more gains in the Taiwanese semiconductor company.
optionMONSTER's Heat Seeker system detected heavy buying in calls at several strikes yesterday, including nearly 9,000 March 6s that went for $2.29 to $2.85, almost 5,000 August 7s for $0.65 to $1.10, and more than 3,000 September 7.50s for $0.75 to $1.14. Volume was well above the previous open interest at each strike, indicating new activity."
Hi Has, i think im going crazy.. can't find article!!! It just disappeared. What i do remember is it was purchased at once. The only reason i found it was after looking at Cramer show last night and he mention Bob Lang. I don't know anything about options but this did set my spidey senses off!
Sentiment: Strong Buy
Hi Mutugrad- im totally clueless with options but only mention what i thought was interesting. Actually i wasn't going to mention it but thought maybe someone would figure it out who knew options.
Sentiment: Strong Buy
Thanks for adding to the dialogue and I appreciate your input as always.
Note that INTC has a smaller interest in Himax Displays now via their investment group. But, in this case, I am sure you have to mean INTC the operating company as they want operating control along with financial control.
And, INTC ownership makes so much more sense than Google or the like as INTC would sell to all vendors and companies which allows them to place a much higher value on HIMX than Google who would stop sales to their competitors and thus would not get the value INTC would by selling to all.
It still makes sense for Google to complete the investment as that allows them to share in the profits..........which would act as a discount to them on their price..........and gets them favorable treatment and interaction with the engineering and design teams.
And, the MM's, by inducing the shorts to sell short, are being led to slaughter. But, the MM's will take shares however they can get them.
Yeah, that's a HUGE investment to make... on what might appear to be a very long shot (meaning getting to $19+ so soon) unless someone knows something.
BUT, if that 7000 contract position goes just $1 into the money, that would be a significant gain... at $20.50 it's somewhere on the order of a $1 million gain.
One million gain would be too small for institution.Minimum would be $5 or $6. My non expert calculation would be$25 per share and I think that's still a steal.Microsoft just bought 100 patents for 200 million, we hold 3000 patents.The real story and this is just a guess is we hold the key patent for Lcos microdisplay and that's why google had to use this little Taiwanese company and soon Samsung! I have a buddy who is a patent lawyer, he should fill in the blanks!
Sentiment: Strong Buy