How To Turn $800,000. Investment Into $2,800,000. In 48 hrs
Did Exelon-Pepco deal news leak?
By: Kevin McCoy May 1, 2014 11:11 am
Did someone trade on advance news about Exelon’s $6.8 billion deal to buy Pepco Holdings? The analysts at Option Monster think so.
Announced Wednesday, the tie-up between by Exelon, the largest U.S. nuclear industry operator, and Pepco, a Mid-Atlantic utility operator serving 2 million customers from Washington to New Jersey, would create the region’s largest electric and natural gas utility.
Exelon agreed to buy Pepco for $27.25 a share. The news pushed Pepco shares up $3.97 to a $26.76 close Wednesday, the highest in a decade.
In March, Pepco averaged 104 daily options contracts, across all expiration dates, according to Option Monster’s Jon Najarian.
But on Monday, two days before the deal was publicly disclosed, volume soared to more than 4,000 call options contracts traded. Buying call options represents a financial bet that the company’s stock price will rise.
“The bulk of that 4,000 calls was the May and Aug. 20 call options for $1.90 – $2.00,” Najarian wrote in his daily options blog. “Whoever did this took an $800,000 investment and turned it into $2,800,000 in 48 hours. I suspect we will see an SEC investigation into same shortly,” wrote Najarian.
BTW, How Many Investors Sold @ 52 Wk. High on Monday or Tuesday?