Wild action in Chinese ADR

NetQin Mobile

(NQ) yesterday as shares took a dramatic dive late in the afternoon on criticism from Muddy Waters Research. As shares fell from near $23 to below $10 the stock and options halted several times based on current circuit breaker policies. NQ shares have not yet opened, and the firm is hosting a conference call to address the questions. With the upcoming Twitter IPO in the headlines today, it's very interesting to see how the option flow played out yesterday:

It's unclear exactly when the research was posted, but the tweet is stamped 1pm ET and the options flow explodes just a few minutes ahead of that moment. The top trade in that list- 316 Dec 10puts bought for $1 finished the day (early, since NQ closed at 2:11pm and never reopened) trading near $2.80.

In the past we've seen a few foreign ADRs remain halted for weeks as the firms work on documents to satisfy exchange and SEC requirements. In these cases the options holders can end up in a very tricky position, heading into expiration with contracts that have no clear underlying level. Stay tuned in this one!

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At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.