Senate Investigates Options Trading

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Your intraday options trading update.

U.S. Senate investigators are looking into the possibility that the $14 billion hedge fund SAC Capital Advisors may have used inside information to trade options on stocks before high volume situations such as a news announcements or a takeover.

The office of Sen. Charles Grassley (R-Iowa) is looking at about 20 events over the last decade where Stamford, Conn.-based SAC could have benefited from inside information. The 20 cases involve healthcare firms that may have been impacted by news arising from clinical trials and information shared at industry conferences, according to reports. The stocks and the events have not been released.

Grassley’s staff met with SAC officials earlier this month, and has requested information from the U.S. Securities and Exchange Commission, U.S. Justice Department and the Financial Industry Regulatory Authority (FINRA) about the events, according to The Wall Street Journal which broke the story on Friday. FINRA is an industry group that oversees securities firms in the U.S.

Grassley is the ranking Republican on the Senate Judiciary Committee. He has criticized the SEC for its failure in the Bernard L. Madoff Ponzi scheme that defrauded investors of billions over several decades.

News of the investigation follows the conviction this month of Galleon Group hedge fund billionaire Raj Rajaratnam on conspiracy and securities fraud in an insider trading case. In addition, two former SAC portfolio managers have pleaded guilty to securities fraud.

However, no charges have been brought against SAC in those cases or the Grassley investigation.

High Options Volume by Strike

Fears of more volcanic ash disrupting travel has sent airline stocks diving including AMR Corp. (NYSE: AMR). AMR was down .05 to 6.61 this morning as an Icelandic volcano spewed smoke into the air starting Saturday. The AMR Jun 7 Call was the most active strike this morning, trading down .05 to .17 on volume of more than 40,000 options.

Post expiration Friday, the SPDR S&P 500 ETF (NYSE: SPY) dominated options trading with the SPY Jun 132 Put and the 130 Put each trading more than 36,000 contracts. The 132 Puts are up .65 to 2.55 while the 130s are up .44 to 1.78.

The Financial Select SPDR ETF (NYSE: XLF) is down .20 to 15.52. The XLF Jul 17 Call is down .02 to .06 on 33,408 options.

Major Stock Trading Volume Movers

Mosaic (NYSE: MOS) trades 10 million some shares, op .60 to 66.11. Last week, the fertilizer company issued a secondary stock offering of 100 million shares at $65 a share as it sought to buy out Cargill’s 64% interest in Mosaic. In addition JPMorgan and Stifel Nicholas upgraded MOS.

Red Robin Gourmet (NASDAQ: RRGB) trades 426,000 shares, up .68 to 35.76.

Find more option analysis and trading ideas at Options Trading Strategies.

Stocks/Underlying – Big Daily Change in Option Volume

Guggenheim China Technology ETF (NYSE: CQQQ) sees 4654 options trade this morning, up about 2100%, as CQQQ falls nearly 3% to 28.68.

More fertilizer news with China Agritech (NASDAQ: CAGC) trading 1664 options. NASDAQ officially delisted and suspended trading in CAGQ on Friday. Investors long options can attempt to close positions.

SAP Ag (NYSE: SAP) trades nearly 82,000 options as stock drops 1.6 to 59.30. SAP is down 2.37% to 59.44.

Stocks/Underlying – High Option Volume

The SPDR S&P 500 (NYSE: SPY) has option volume of about 2.7 million contracts as SPY trades down 1.78 to 131.83.  The Standard & Poor’s Index Options (CBOE: SPX) is down 18.22 to 1315.05 with 616,000 options traded.

PowerShares QQQ Trust (NASDAQ: QQQ) is down 1.01 to 56.76 with 610,000 options traded.

The iShares Russell 2000 Index ETF (NYSE: IWM) trades 120,000 options and is down 1.42 to 81.44 with 583,000 options trading.

The iShares Silver Trust (NYSE: SLV) trades more than 368,000 options as it falls down .07 to 34.11.

The CBOE Volatility Index (CBOE: VIX) is up 1.17 to 18.60 with 261,000 options trading against the Fear Gauge.

Apple (NASDAQ: AAPL) trades 246,000 options as stock drops 2.57 to 332.65.

Burney Simpson is the managing editor of InvestorPlace options pages.


Article printed from InvestorPlace Media, https://investorplace.com/2011/05/senate-investigates-options-trading-amr-spy-vix-qqq/.

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