Now we know what was up with the unusual activity in
has written about the unusual activity in Texaco's options in the past, most recently on
( CHV) said Monday it is buying Texaco. Under the terms of the deal, Texaco shareholders will receive 0.77 of a share of Chevron for each share of Texaco stock they own, valuing the deal, based on where Chevron is trading Monday morning, at $33.9 billion. The combined company, if it clears all the hurdles it faces, including regulatory scrutiny, will be called
Shares of Chevron were down $4.50 to $79 3/4, while Texaco was up $1.50 to $56.63.
The Skupp-Seidman options team at
saw this one coming. Texaco for the past two weeks had been on their "positive watch list," and the duo has pointed out the call buying activity in the oil company's options, in research notes to clients.
Texaco call options were seeing a decent amount of activity Monday on news of the deal. On the
American Stock Exchange
, more than 1,400 of the October 55 calls traded, sending the contract's price up 3/4 ($75) to 2 1/4 ($225). October options expire Friday. The November 60 calls were active on the Amex, with nearly 1,300 contracts changing hands. The calls were down 1/2 ($50) to 1 3/16 ($118.75).
Securities and Exchange Commission
announced Friday it filed a civil complaint in federal court in New York alleging that Michael A. Petrescu-Comnene, a former analyst in the investment banking department at
Salomon Smith Barney
unit, traded on inside information. And in one glaring example, used the options of one target company to do so.
According to the SEC, Petrescu-Comnene "engaged in repeated acts of insider trading over a nine-month period," with one of those alleged insider trading acts occurring surrounding Citigroup's buyout of
Associates First Capital
The SEC charged that Petrescu-Comnene "illegally tipped at least two of his friends about potential merger and acquisition transactions that learned about while working at Salomon."
The SEC alleged that Petrescu-Comnene and his cohorts made their largest score by buying Associates call options the day before the Sept. 6 takeover announcement. The SEC charged that at least two of his friends purchased a total of 50 September 30 call options in two different brokerage accounts.
In the wake of the takeover announcement, Associates First's stock soared 38% and resulted in profits for Petrescu-Comnene and his pals totaling $40,875, the SEC said.
The SEC also said that the U.S. Attorney for the Southern District of New York arrested Petrescu-Comnene and filed a criminal complaint against him, charging him with securities fraud and conspiracy to commit securities fraud.
There was plenty of
funky action in Associates' options ahead of the announced deal; details of which emerged only after the takeover was announced.