Friday, November 13, 2009

3Com Corporation (COMS) - Takeover (UPDATE)

Better safe than sorry. Discretion is the better part of valor. I would rather not got to jail?... Call it what you want, the big winner in the COMS option trades in the last blog has voluntarily cancelled the trades that would have netted in excess of $1,000,000 in one day.

The exchange was buzzing yesterday about the trades getting busted. Was is it a case of too obvious? Who knows, whatever the case, someone is volunteering to give up huge money to avoid what may have been an obvious investigation.

So how could you know this happened without being on the exchange floor? Try this: Level II for the Nov 5 calls shows a decrease in Open Interest . This can only happen 3 ways:

(1) Closing trades
(2) Exercise
(3) Busted trades

There was not enough volume for closing trades yesterday (you can find this number in Livevol Pro a number of ways). Early exercise makes little to no sense; there is no dividend, the deal is in the future and who wants to kill free puts. So, it's gotta be a busted trade.

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