So its a nice quiet day in SEPR, nothing special happening... then BOOM out of nowhere the stock rips over 4 bucks from 17.80 to 22.22 in 7 minutes. Next thing you know, the stock is halted. News? Hmm.. nothing that we could find intraday.... But after the close the news was all over ..
Dainippon Sumitomo Pharma to Acquire Sepracor for U.S. $23.00 Per Share in an All-Cash Tender Offer Valued at Approximately U.S. $2.6 Billion
You can see the intraday and the daily chart has a massive spike, the giant green volume bar meaning ISE see's large volume of open customer call buying. One key point to notice here is the IV30 actually ripped up during this spike, meaning it caught the market makers off guard.
This is very important, in "ALL CASH" tenders, the vol should be crushed. If the news was announced before the stock move, the market makers would have lowered the vol to almost nothing like 10-15 vol for the front month options. One exception to this is if there is the possibility for a higher bid.
Lets look at order flow. On the company tab, the net deltas and net premium bot and sold, it is showing strong bullish betting almost $600k of premium bot and almost 400K in deltas bot. Also the largest trade of the day, at 1:09, is an Intermarket Sweep for 925 of the Sep 20 Calls for .10, 7 minutes later, they are $2.20 in the money. Nice way to turn $10k into $200k in 7 minutes.
Finally, looking at today's IV30, the market makers realize they have been taken to the woodshed on both the stock move and the vol move and as expected they drop the vol 47 points to 12 where we would expect it to be for a cash takeover.
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