Trading action in Hanesbrands, Inc. ("HBI" or the "Company") over the past few weeks provides a very transparent view of just how severely certain stocks can be manipulated on options expiration day. As a long-term investor these occurences are insignificant, but it's important for even long-term investors to understand the level of intense market manipulation that can occur by deep-pocket institutions and not to view any of these "random" events as anything more than myopic greed.
On October 25th, HBI reported strong earnings with the stock rallying over 10% and continuing to increase by about 20% in the following weeks on fairly average volume (700k shares per day). Despite market gyrations that impacted most stocks in recent weeks, HBI remained unfazed trading between $30 to mid $31 on average volume.
Those focused on HBI options would have seen the value of the $30 calls (November expiry) expand significantly after earnings and maintain a fairly stable value of $1.55 through the past few weeks. Interestingly enough, on options expiration day - Friday, November 16th - HBI shares dropped 6.4% by midday on average volume, wiping out 97% of the value of the $30 calls. In addition, there was no major news that impacted the broader markets or even HBI-specific/industry-specific (cost of cotton, etc.) news released that should have led to this type of trading (click to enlarge):
Open interest provides some insight, as it shows that there were 1,190 put contracts at $30 outstanding while there were 626 contracts on the $30 calls. Further, the selling from the start was very deliberate with no significant upside action until the calls were driven to a $0.05 trade. Despite the one-sided directional selling on a "no news" day on tepid volume, those driving HBI trading action on options expiration day are probably hoping this drop is viewed as a "random" trading day.
While this occurs frequently with many other boring, under followed stocks and will continue to occur, it's worthwhile to occasionally call out this overt manipulation.
DICLOSURE: AUTHOR MANAGES A HEDGE FUND THAT IS LONG HBI