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Message
Does The SEC Investigate Odd Options Activity?
Posted on 2/23/17 at 9:06 pm
Posted on 2/23/17 at 9:06 pm
In the event of a buyout? The reason I ask is, I pay a monthly fee for a chat room that basically highlights odd options activity and I make trades accordingly. Im really swamped at work so I try to go over it all at night and what I do is usually buy shares not calls bc I don't have that risk appetite. Anyways the reason I ask is last month WYNN was at $88 and someone began buying up thousands of $95 calls and so I bought the stock and of course the stock runs up to $103. I sold it post earnings.
Now this month, they have been buying in huge huge size K calls. That is kellogg the cereal co. You can look at the open interest in march $80-90 calls. There is huge open in interest in $80s and $90s in a massive call spread and then today another 2500 $82.50 march calls were bought all with the stock in the low $70s. Also the other day a ton of $72.50 march puts were sold in size too.
Basically it looks like some people are betting big money on a K buyout this month and with the unliver/kraft deal falling apart I guess many feel kraft will come this direction. Anyways lets say a buyout happens, isn't obvious to the SEC that someone knew beforehand and backed up the truck on calls? It just seems wild to be that people can buy 20,000 march $80/90 call spreads in a name that was $72 at the time with no catalyst really within 30 days to drive it higher like earnings.
Im not saying it works all the time, but many times it does and its damn suspect to me
Anyways just figured I'd ask what the deal was with such trades
Now this month, they have been buying in huge huge size K calls. That is kellogg the cereal co. You can look at the open interest in march $80-90 calls. There is huge open in interest in $80s and $90s in a massive call spread and then today another 2500 $82.50 march calls were bought all with the stock in the low $70s. Also the other day a ton of $72.50 march puts were sold in size too.
Basically it looks like some people are betting big money on a K buyout this month and with the unliver/kraft deal falling apart I guess many feel kraft will come this direction. Anyways lets say a buyout happens, isn't obvious to the SEC that someone knew beforehand and backed up the truck on calls? It just seems wild to be that people can buy 20,000 march $80/90 call spreads in a name that was $72 at the time with no catalyst really within 30 days to drive it higher like earnings.
Im not saying it works all the time, but many times it does and its damn suspect to me
Anyways just figured I'd ask what the deal was with such trades
This post was edited on 2/23/17 at 9:12 pm
5
Posted on 2/23/17 at 9:24 pm to dabigfella
There's always leaks
Posted on 2/23/17 at 9:33 pm to dabigfella
quote:
Anyways just figured I'd ask what the deal was with such trades
I figure the SEC would investigate such trades if they saw anything suspicious, but I don't think that's what is going on most of the time. One thing you/the chat room are likely seeing are delta hedging trades. The Trade Flash gadget for thinkorswim lets me know when they happen. Here's some from a bit earlier today. Compare those three delta trades I linked to your chat and see if that's what is happening.
That's about the only thing I'm immediately aware of, but the chat may be showing other trades, too.
Posted on 2/23/17 at 9:33 pm to dabigfella
quote:
what I do is usually buy shares not calls bc I don't have that risk appetite
I don't understand. You have more risk purchasing a share than a call.
Posted on 2/23/17 at 9:41 pm to southernelite
um no? If I bought 1000 shares of kellogg for $74,000 the stock isnt going to go bankrupt, if I bought 10 calls at $82.50 and it doesnt get there I just lost $500. If I have shares I can hold them and if the trade doesn't work either sell the shares if they're up or sell calls vs the position till I get out. If you buy calls and the trade fails you end with $0. You may mean less risk in terms of total dollars at risk but Im not scared holding K shares vs buying K calls 10-15% above the current price with less than 30 days to go
Posted on 2/23/17 at 9:46 pm to Omada
Omada thats very possible man, but like WYNN for instance it was hovering in the high 80s around new years and huge call lots were being bought at $95 and the thing was earnings apparently for wynn dont have a set date and they're announced literally on a whim. Anyways earnings were apparently first week in february and these huge late january call buys come in at $95 and guess what happens wynn suddenly announces earnings 1 day after LVS announced theirs and the next day the calls all had ridiculous IV increases. Sure enough the stock in the 2-3 weeks leading up to that ran from $88-99 on nothing and then went to $104 or so post earnings.
The reason I mention K is bc these trades are massive and I mean sure not much money to a $1B fund but that K $80/90 call spread the other day was easily $1M+ and then the 2500 puts sold at the same time made it a multi million dollar risk reversal. Days before that they had bought 25,000 $85's and closed those and moved into the 80/90 spread. Im not saying anything happens with K, but if it does get acquired this month do they look into a weird trade like that or no? I'm just curious if they would look into that for insider trading if it somehow gets bought at say $85+
The reason I mention K is bc these trades are massive and I mean sure not much money to a $1B fund but that K $80/90 call spread the other day was easily $1M+ and then the 2500 puts sold at the same time made it a multi million dollar risk reversal. Days before that they had bought 25,000 $85's and closed those and moved into the 80/90 spread. Im not saying anything happens with K, but if it does get acquired this month do they look into a weird trade like that or no? I'm just curious if they would look into that for insider trading if it somehow gets bought at say $85+
Posted on 2/23/17 at 9:56 pm to dabigfella
The SEC most definitely does investigate but I wouldn't think you would be suspect to any illegal activity, based on what you've said.
Posted on 2/23/17 at 9:56 pm to iAmBatman
haha im not worried about me lol. Im talking in general like whoever is buying $1M worth of calls if a buyout were to occur.
Posted on 2/23/17 at 11:22 pm to dabigfella
Rule #1 of trading: Never turn a trade into an investment. 
Posted on 2/24/17 at 7:10 am to dabigfella
I find the SEC to be ineffectual, not as ineffectual as the CFTB, but ineffectual. That's an opinion. And I notice what you notice with unusual options activity a lot.
Off topic, I own WYNN. I was surprised by the unusual run up as their earnings weren't anything spectacular. I just assumed it was due to their Macau comments. Or this piece linked below that went largely unnoticed:
LINK /
What are your thoughts on WYNN's run up?
Off topic, I own WYNN. I was surprised by the unusual run up as their earnings weren't anything spectacular. I just assumed it was due to their Macau comments. Or this piece linked below that went largely unnoticed:
LINK /
What are your thoughts on WYNN's run up?
Posted on 2/24/17 at 8:04 am to Iowa Golfer
like look today, futures are down pretty decently and K is up pre market....we'll see where it goes.
As for WYNN I know that company inside out as a shareholder and customer. I really never wanted to be a shareholder of wynn as you know it was like $240 or maybe $260 a couple years back. I had to become one in the $50-690 range last year it was too cheap, market cap was down to like $4-5B I wanna say. I will tell you this, the WYNN earnings were spectacular imo. They said there are 35 hotels in Macau and the WYNN controlled over 50% of the VIP segment, that says alot about where the big clients like to go.
I was at the WYNN for the super bowl and the week after and the hotel was fairly dead, which is always is everytime I go but I personally think that has more to do with higher table minimums than most places. As a facility steve wynn said on the conference call people are willing to pay more for the place thats the nicest and is upkept in the most impeccable manner. The Wynn/Encore in vegas is just on a different level from everything else and I personally like it bc it keeps the riff raff of say the linq hotel out.
The real story long term is Macau and Japan which legalized casinos recently and will be the 2nd biggest market in the world, Vegas makes up a small part of WYNN numbers. Macau had a huge crackdown on the VIP players a couple years ago and all casinos died. You have Melco Crown,MGM, and Las Vegas Sands aimed at the mass market and Wynn aimed at the high market. Sands pays a sick dividend almost 6% but im not sure how sustainable it is long term if earnings dont pick up bc its payout ratio tops 100%, meanwhile WYNN said he could raise the dividend 50% right now but he's not bc of the projects coming.
At the moment WYNN has substantial debt I wanna say near $10B and their market cap is near $10B, but all the debt is manageable and the stock trades currently at like 10x EBITDA. The reason I think it goes higher is the WYNN palace is the best hotel in cotai area and it just launched 6 months ago and the cc he said its doing $1.6M/day of EBITDA and was the fastest property he's ever seen to the $1M/day mark. Anyways there is that + they're building the first and only boston area casino which should be done in less than 24 months and that will supposedly give off $300-500M in EBITDA which should add $3-5B in market cap or 33% off today.
I was just there like I said and I dont know how well you know the place but if you remember where the Ferrari Dealer/Steve Wynn personal car collection was? Well a mall is going up there called Wynn Plaza set to open late this year, you can read how its 110,000 sq ft mall and they already sold 49% stake to someone for $275M I believe? Anyways Steve said that he turned a space making literally no money into prime retail leasing for $300/ft for a total of $50M and it was a no brainer. He literally invested $50M and got back $275M upfront and will basically make $150/ft now on it and im sure there's a waitlist to lease it. Finally the big one is Wynn Paradise Park. The paradise park is basically another brilliant move by steve where he's taking that massive golf course that does $3-5M/year in EBITDA he said and building another tower + boardwalk + massive water park that he says will do $500M in EBITDA. He says the golf course was a placeholder till he had a brilliant idea.
So all in all wynn paradise park + wynn plaza + wynn boston seems to be adding lets say $1B a year in EBITDA thats double today's EBITDA therefore shareprice should rise substantially assuming Macau has no setbacks but you never know with that communist nation of nation and potential trade wars with china.
I'd say casinos are a long term play on china and its growth story, macau already eclipses vegas by many fold in terms of revenue and that will only grow. LVS i think is safer, but the market cap is $40B+ I dont see the upside of the WYNN at sub $10B. I have both, but a larger stake in Wynn and thats my thesis. After earnings I held hoping we'd break $104 and hold when we didn't I sold at $102.5 and its fallen back quite a bit, hopefully early march macau numbers show continued growth. The stock chartwise has been in purgatory for a long team, it needs $104+ to breakout so id prob add now and then more up there.
As for WYNN I know that company inside out as a shareholder and customer. I really never wanted to be a shareholder of wynn as you know it was like $240 or maybe $260 a couple years back. I had to become one in the $50-690 range last year it was too cheap, market cap was down to like $4-5B I wanna say. I will tell you this, the WYNN earnings were spectacular imo. They said there are 35 hotels in Macau and the WYNN controlled over 50% of the VIP segment, that says alot about where the big clients like to go.
I was at the WYNN for the super bowl and the week after and the hotel was fairly dead, which is always is everytime I go but I personally think that has more to do with higher table minimums than most places. As a facility steve wynn said on the conference call people are willing to pay more for the place thats the nicest and is upkept in the most impeccable manner. The Wynn/Encore in vegas is just on a different level from everything else and I personally like it bc it keeps the riff raff of say the linq hotel out.
The real story long term is Macau and Japan which legalized casinos recently and will be the 2nd biggest market in the world, Vegas makes up a small part of WYNN numbers. Macau had a huge crackdown on the VIP players a couple years ago and all casinos died. You have Melco Crown,MGM, and Las Vegas Sands aimed at the mass market and Wynn aimed at the high market. Sands pays a sick dividend almost 6% but im not sure how sustainable it is long term if earnings dont pick up bc its payout ratio tops 100%, meanwhile WYNN said he could raise the dividend 50% right now but he's not bc of the projects coming.
At the moment WYNN has substantial debt I wanna say near $10B and their market cap is near $10B, but all the debt is manageable and the stock trades currently at like 10x EBITDA. The reason I think it goes higher is the WYNN palace is the best hotel in cotai area and it just launched 6 months ago and the cc he said its doing $1.6M/day of EBITDA and was the fastest property he's ever seen to the $1M/day mark. Anyways there is that + they're building the first and only boston area casino which should be done in less than 24 months and that will supposedly give off $300-500M in EBITDA which should add $3-5B in market cap or 33% off today.
I was just there like I said and I dont know how well you know the place but if you remember where the Ferrari Dealer/Steve Wynn personal car collection was? Well a mall is going up there called Wynn Plaza set to open late this year, you can read how its 110,000 sq ft mall and they already sold 49% stake to someone for $275M I believe? Anyways Steve said that he turned a space making literally no money into prime retail leasing for $300/ft for a total of $50M and it was a no brainer. He literally invested $50M and got back $275M upfront and will basically make $150/ft now on it and im sure there's a waitlist to lease it. Finally the big one is Wynn Paradise Park. The paradise park is basically another brilliant move by steve where he's taking that massive golf course that does $3-5M/year in EBITDA he said and building another tower + boardwalk + massive water park that he says will do $500M in EBITDA. He says the golf course was a placeholder till he had a brilliant idea.
So all in all wynn paradise park + wynn plaza + wynn boston seems to be adding lets say $1B a year in EBITDA thats double today's EBITDA therefore shareprice should rise substantially assuming Macau has no setbacks but you never know with that communist nation of nation and potential trade wars with china.
I'd say casinos are a long term play on china and its growth story, macau already eclipses vegas by many fold in terms of revenue and that will only grow. LVS i think is safer, but the market cap is $40B+ I dont see the upside of the WYNN at sub $10B. I have both, but a larger stake in Wynn and thats my thesis. After earnings I held hoping we'd break $104 and hold when we didn't I sold at $102.5 and its fallen back quite a bit, hopefully early march macau numbers show continued growth. The stock chartwise has been in purgatory for a long team, it needs $104+ to breakout so id prob add now and then more up there.
This post was edited on 2/24/17 at 8:06 am
Posted on 2/24/17 at 10:12 am to dabigfella
Yes, from anyone but Bama.
Posted on 2/24/17 at 5:46 pm to dabigfella
I appreciate the detailed response. I've owned it since the IPO. I do sell to take gains periodically, and have bought back in at later, lower entry points.
Off topic, I've met Steve Wynn and Sheldon Adleson. Briefly. 2011, with our now POTUS actually, and in LV. I'm always in LV on SB weekend, and was just there. Pucci has tried to get me to Wynn, but I like places with better odds, and better comps for what little gambling I do. When I had no money, I used to love to take $300 that I couldn't afford and play craps. Now that I have a little money, I don't like to gamble as much. My marker line limits are $2500, and I've never got close to losing that. So a pretty boring gambler. Hardly a gambler at all really.
Interesting. Your an options guy, own in S Florida, go to LV and generally seem a lot like me. Which is to say a blue collar mentality that turned white collar without a degree in advanced economics, but moderately successful despite that.
I wouldn't mind playing a round of golf with you at some point. Either LV or Florida. I'd prefer Florida. I don't ship clubs to LV due to the hassle, and I'm mostly there for some craps, baccarat, and Kobe beef. I'm frequently in S Florida in the winter, can do a weekend in LV most anytime. Also Lake Geneva and Atlantic City if you ever make it there. I haven't played Doral in a while. I'll probably be back down there after March 1st.
Off topic, I've met Steve Wynn and Sheldon Adleson. Briefly. 2011, with our now POTUS actually, and in LV. I'm always in LV on SB weekend, and was just there. Pucci has tried to get me to Wynn, but I like places with better odds, and better comps for what little gambling I do. When I had no money, I used to love to take $300 that I couldn't afford and play craps. Now that I have a little money, I don't like to gamble as much. My marker line limits are $2500, and I've never got close to losing that. So a pretty boring gambler. Hardly a gambler at all really.
Interesting. Your an options guy, own in S Florida, go to LV and generally seem a lot like me. Which is to say a blue collar mentality that turned white collar without a degree in advanced economics, but moderately successful despite that.
I wouldn't mind playing a round of golf with you at some point. Either LV or Florida. I'd prefer Florida. I don't ship clubs to LV due to the hassle, and I'm mostly there for some craps, baccarat, and Kobe beef. I'm frequently in S Florida in the winter, can do a weekend in LV most anytime. Also Lake Geneva and Atlantic City if you ever make it there. I haven't played Doral in a while. I'll probably be back down there after March 1st.
Posted on 3/1/17 at 6:12 am to Iowa Golfer
there goes Wynn today Iowa Golfer, gonna have a monster gap up, incredible macau growth 18% last month!
Posted on 3/1/17 at 8:21 am to dabigfella
Almost all 40K shares moved at pre open. About 3600 moved last night dark pool. It executed immediately this morning.
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