Seeking Alpha

Options action in magicJack raises eyebrows

  • 'It's too convenient to overlook as normal market activity," says one options trader of the surge in call option activity in magicJack (CALL) just days before Whitney Tilson touted the stock as his next multi-bagger.
  • Options trading volume flew to more than 10x the typical level on January 27, with the action taking place in the February $15 calls. First, a large amount of sales drove the price of the thinly traded contract sharply lower (to $0.35 from $0.50). Immediately following those sales, a trader purchased 3,500 of the calls at an average cost of $0.48 each. At yesterday's closing price for the stock of $16.52, the trader would have tripled his/her money.
  • Tilson's Kase Capital purchased 165K shares of CALL during Q4 and has continued to buy this year. Tilson says he wasn't even aware options on magicJack were listed and has no idea if anyone caught wind of the investment ahead of his public filing.
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Comments (4)
  • Mattster
    , contributor
    Comments (163) | Send Message
     
    Hey I get it but you'd think they would be a little more careful not to make the insider trades so obvious. As if that few extra bucks is worth more than the suspicions they raise.
    12 Feb 2014, 08:50 AM Reply Like
  • Dr Joseph Haluska
    , contributor
    Comments (514) | Send Message
     
    How does someone buy 165,000 shares of anything and not be aware that options are even listed?
    12 Feb 2014, 09:11 AM Reply Like
  • Ryan Sullivan
    , contributor
    Comments (19) | Send Message
     
    So he didn't know about the CALL calls?
    12 Feb 2014, 10:27 AM Reply Like
  • Albertasunwapta
    , contributor
    Comments (290) | Send Message
     
    Why would he see them as pertinent to his research? Why would he care? (However maybe his trader should have mentioned them.)
    In reviews there has been mention of internal stock manipulation so one shouldn't be surprised if some remaining staff (maybe on their way out) caught wind of changes, reports, etc. Or maybe even some lines are "tapped". :-) Then there's the speaking group that Tilson goes before.
    It will be interesting to see what the regulators dig up.
    Google wsj for "MagicJack Options Trade Hits Jackpot, But Raises Questions" for some interesting trading detail.
    MagicJack investors can thank the options trader for bringing more press coverage to the company however. :-)
    12 Feb 2014, 11:48 AM Reply Like
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