Gotta love the late-Friday bursts of directional option volume! Leap Wireless (LEAP) shares have more than doubled in value this morning on reports AT&T (T) wants to buy the company and other suitors are expected. Shares finished Friday trading for $7.98, are now over $17 Monday morning after AT&T made an offer to buy the company for $15 per share, in cash. Meanwhile, options on the stock saw heavy trading late -- Friday and the unusual activity is stirring quite a buzz in the options world -- as it appears that some investors might have been tipped off that a deal was in the works.

Options volume on LEAP Friday was 5X the daily average. By way of comparison, typical options volume is about 1,350 contracts. Yet, on Friday, 6,800 calls and 350 puts traded on the stock. August 9, July 9 and October 8 calls were the most actives and there were no big trades. The largest trade was a 164-lot of Jul 9 calls for 9 cents per contract. Interestingly, roughly 80% of the volume in LEAP options Friday occurred in the final two hours of trading.

LEAP is trading above the takeover offer price of $15 per share, possibly on expectations another bidder might emerge. At that price, a July 9 call, which was trading for just 9 cents per contract Friday afternoon, has intrinsic value of $8 per contract Monday morning. Therefore, the 164-lot that was apparently bought for $1,510 late-Friday, is now worth $131,200. Experience suggests regulators will be scrutinizing the activity for signs of insider trading because it's fairly obvious that some investors were expecting the stock to LEAP before this week's expiration and buying out-of-the-money July call options on the stock late-Friday.

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