Intel may be about to splurge $US10 billion on Alterain its biggest acquisition ever. The Wall Street Journal broke the news last week.
But as noted by Fortune’s Stephen Gandel, WSJ reporter Dana Mattioli teased the news on Twitter before there was a full article online.
And this one tweet from Mattioli may have been worth some big money to one trader.
According to Gandel, options activity in Altera shows that one trader made $US2.4 million off that tweet.
Gandel reports that at 3:33 pm ET on Friday, one trader bought options contracts worth around 300,000 shares of Altera with a strike price of $US36 and a mid-April expiration. Gandel notes that the whole trade cost around $US110,000.
This means that when these options expired, the owner of one contract could purchase 100 shares of Altera at $US36 no matter the current market price. If shares move above this price by expiration date the value of the options will go up, otherwise they will likely expire worthless and the buyer will lose their initial investment.
At the time, Altera shares were trading around $US34 per share, so these options were considered “out of the money” and cost about $US0.35 a piece.
But after the WSJ story broke, shares of Altera quickly spiked and closed near $US44, bringing the price of each option to $US8.50 and taking their collective value to $US2.4 million.
But given the speed of the trade, Gandel notes that it may not have been a fast-fingered trader but a computer program focused on M&A.
Dana Mattioli is one of WSJ’s main M&A reporters. So if you’re training a computer to catch M&A news first, you would probably train it to focus on her. And “is in talks” is also a pretty likely key phrase one might flag the software to recognise. So perhaps it’s not that surprising that a computer would pick up this deal.
Gandel notes that the practice is not illegal, but has been widely controversial because of allegations that it gives some traders an unfair advantage based on speed and access to data.
High-frequency trading was the subject of Michael Lewis’ book “Flash Boys.”