Someone Made $3 Million Off the Bristol Myers Purchase of Inhibitex

Jan 8, 2012
J. Webster
Comments Off on Someone Made $3 Million Off the Bristol Myers Purchase of Inhibitex

If there’s a trader you should follow these days it’s Jon Najarian. He’s appeared to have made a killing on Wall Street the past few weeks with some of his bets. Najarian monitors the options market and the put and call numbers to see what stocks might jump or sink.

On Friday, Jon Najarian said his heat seeker tool at OptionMonster identified big call buying activity in Inhibitex. Well, what happened over the weekend? Oh, not too much, just Bristol Myers announcing they were purchasing Inhibitex for 2.5 million, $26 a share. Inhibitex was trading for around $9 a few days ago. So yeah, that’s a nice jump if you own the stock and especially so if you own some options – since you didn’t have to put up so much money and get a nice 163 percent jump in the stock.

However, what really stands out, and what ZeroHedge discussed in his post, is who are all these call buyers and what did they know and when did they know it? It all seems a bit fishy when you take a closer look at it. And one call buyer in particular might $3 million over the weekend:

“The largest trade that stuck out was the purchase of 2,000 Feb 10 calls for $2.00. Based on the BMY takeover price, these calls are now worth $16 ($26 minus the $10 call strike). That means the well-informed (lucky) owner turned $200,000 into $3,200,000 over the weekend.” (ZeroHedge)

I’m going to go out on a limb here and say somebody knew something about the deal and decided to buy some options. Just a guess. Who makes $3 million in a few days without some sort inside knowledge? It’s like winning the lottery. Again, something smells a little fishy here.

The only saving grace could be option traders making bets on the JPMorgan Health Care conference that starts this next week – traders saying they were making bets on some announcement during the conference. Still, these option trader seems like too much of a good thing.

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