Insider Trading on UUP Options?

Ok, who knew in advance of the UUP "dislocation" from this news:

Creations of new shares in the fund are temporarily suspended pending clearance of the registration statement by the SEC, the Financial Industry Regulatory Authority and the National Futures Association and declaration of the effectiveness of the registration statement.

SOMEONE came after the front month (November) $23 CALLs yesterday, with the underlying trading in the mid 22s. For 10-15 cents. Some 300,000 of them were bought yesterday.

They just spiked on the re-open for more than a clean double after UUP's halt and some 60,000 of those contracts have, in the last few minutes, been sold. The "nutso premium" has since relaxed and is now "only" a clean double from yesterday's 10 cent close.

You don't think they expected this to happen, do you?

You tell me what that looks like, and let me know when the responsible party for those CALL buys (they were happening yesterday in blocks of 10,000 at a shot - that's institutional) is identified and we see an investigation of what looks like blatant insider trading.

CNBC just asked "is insider trading literally everywhere" on air.

The answer, as I have repeatedly chronicled here in The Ticker, appears to be "Yep!"

Comments

[MarketGuy:]

Agree!

Nov 05 04:32 PM

[jjp:]

Karl,

I totally agree - luckily they usually do not so blatantly tip their hands. Don't know about options, just stocks. I used to believe that the fundamentals were most important until I started playing around with the power rating systems out there. I believe the "charters" do so well because the 5 day running averages get knocked out off of true when insiders know about moves. They smell money in the water and no one is selling so the price goes down until the secret news is revealed and the price shoots up over the running average. The charts at least allow a blind pig (non-insider) to find an acorn every once in awhile.

Nov 05 04:45 PM

[Aiki14:]

It seems impossible to attribute that action to any other scenario except a coincidence so improbable as to defy logic.

Nov 05 04:48 PM

[Mark Anthony:]

Karl:

So exactly what "insider" information they traded on? Do these guys have some "insider" knowledge about the US dollar that the rest of us do not know?

If it was a company stock, some one may have known some insider knowledge of the company that is not publicly known.

But this UUP is merely a US dollar bullish ETF fund. There can not be any insider information you can leverage. You bet a US dollar bull you buy it, you bet a US dollar bear you sell it.

The only plausible "insider" information I could even think of, and as you suggested, is that some one know they will need regulatory filing to issue new shares. But isn't it public knowledge that they are approaching the allowed number of shares as per the prospectus, and hence they will have to register more shares? Any one who cares to do a little bit due diligence would have known it before hand. There is nothing secret here.

It does seem a bit weird that UUP and UDN was not trading against each other yesterday, as they usuaully SHOULD.

Nov 06 07:42 AM

[cristian:]

Nah... that is the beauty of working with somebody else's money ;-) Why do morons do the things they do ? The possibilities are infinite !


On Nov 06 07:42 AM Mark Anthony wrote:

> Karl:
>
> So exactly what "insider" information they traded on? Do these guys
> have some "insider" knowledge about the US dollar that the rest of
> us do not know?
>
> If it was a company stock, some one may have known some insider knowledge
> of the company that is not publicly known.
>
> But this UUP is merely a US dollar bullish ETF fund. There can not
> be any insider information you can leverage. You bet a US dollar
> bull you buy it, you bet a US dollar bear you sell it.
>
> The only plausible "insider" information I could even think of, and
> as you suggested, is that some one know they will need regulatory
> filing to issue new shares. But isn't it public knowledge that they
> are approaching the allowed number of shares as per the prospectus,
> and hence they will have to register more shares? Any one who cares
> to do a little bit due diligence would have known it before hand.
> There is nothing secret here.
>
> It does seem a bit weird that UUP and UDN was not trading against
> each other yesterday, as they usuaully SHOULD.

Nov 06 08:22 AM

[Wez:]

I reported it to the SEC, should I hold my breath now or wait a few days to see if they do anything?

Nov 06 10:38 AM

[Mark Anthony:]

LOL that is also the ugly of letting somebody to work with your money:-) I inheritly do NOT trust any ETF fund. So basically THEY take care of the physical huzzles and get paid nothing, and you, with their help, can comfortably sit in front of your computer and just push buttons and you make all the money without shedding a drop of your own sweat. That does not make sense to me.

That's one reason I recently begin to double the UNG fund.

Read about important basic principles of commodity investments:
seekingalpha.com/user/...

On Nov 06 08:22 AM cristian wrote:

> Nah... that is the beauty of working with somebody else's money ;-)
> Why do morons do the things they do ? The possibilities are infinite
> !

Nov 06 02:08 PM

[etfwealth:]

Have you checked 23 Dec calls? Anybody sold 23 Nov calls later?

Remember $AIG in August? More extreme.

Nov 08 09:58 AM