
Was Someone Tipped Off to the LinkedIn Sale? - fullshark
http://fortune.com/2016/06/13/linkedin-microsoft-insider-trading/
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xt00
Guaranteed this is insider trading if its a small time investor.. I've traded
plenty of options, and no small time guy would buy more than $135k at 160
strike when closing price was 131 and the price of the stock for the past few
months went as low as $100 -- and a time window of 2 months until the option
expires?? Extremely risky trade.. very very likely you would lose all of that
$135k.. the most common thing with options that close in like 2-3 months is
that the stock just stays close to the same value, so you wait a little while
and the stock doesn't go anywhere up or down, so you just have to sell your
options at a loss.. but as that window of time closes to a few weeks and you
are way out of the money like 160 vs. 131, then your ability to sell that
option gets worse and worse until finally you sell it at like a 75% loss. The
175 strike option is even more ridiculous.. 175 on 131... man.. extremely
extremely speculative... unless those traders have a history of making really
risky bets like that, then they are almost assuredly in the know of what was
going to happen. My bet is that they either live near Microsoft or Linked in
locations (Seattle or SV).. Also the reason they placed the bid in the last 5
minutes of trading is that there are various auto-traders out there that chase
this kind of action.. if they see really unusual buying of out of money
options (extremely risky), then they buy a little too thinking that somebody
must know something and they profit also.. so if they bought these in the last
5 minutes of trading, then its possible the algorithm might not pick up on the
trend so it reduces the number of people jumping in blindly into the trade..
so they make the spike smaller, but also isolate themselves.. extremely
risky.. so I think somebody is giving that money back that they made....

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misja111
According to traders who were cited in the article, the calls were part of an
iron condor. An iron condor is an option strategy where you buy and short
several options at once, and which speculates on LOW volatility. The 160 OTM
call just happened to be the most profitable part of the strategy, but you
shouldn't look at it in isolation from the other components.

Cited from theoptionsguide.com:

"The iron condor is a limited risk, non-directional option trading strategy
that is designed to have a large probability of earning a small limited profit
when the underlying security is perceived to have low volatility. The iron
condor strategy can also be visualized as a combination of a bull put spread
and a bear call spread.

Iron Condor Construction

Sell 1 OTM Put

Buy 1 OTM Put (Lower Strike)

Sell 1 OTM Call

Buy 1 OTM Call (Higher Strike)"

~~~
sportanova
linkedin hasn't been a good candidate for low volatility. always possible that
they thought it wouldn't move, but there are much less volatile stocks out
there

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nugget
My understanding from dealing with this in a prior life is that the SEC will
investigate these outliers as standard practice and 1) try to connect the dots
between the buyers and any LNKD insiders, and 2) ask the buyers to show all of
the due diligence and work product that went into deciding to make the trades.
If you were the buyers and knew anyone with prior knowledge of the deal and
couldn't document #2 in great depth then you are likely screwed. Presumably,
anyone working in law or finance would know that this is standard practice and
stay far away. Given how volatile LNKD's price has been over the last year, I
could see these being legitimate trades (on the other hand, I actually took
the other side of some Nov $160 covered calls and felt great about the hedge
until this morning). Also keep in mind that these kinds of ''crazy'' trades
are frequently placed as part of a larger more complex hedging strategy with
net upside much lower than the numbers mentioned in the article.[1]

[1]
[https://en.wikipedia.org/wiki/September_11_attacks_advance-k...](https://en.wikipedia.org/wiki/September_11_attacks_advance-
knowledge_conspiracy_theories#Insider_trading)

~~~
puke
A coworker told me that his brother once bought a large amount of stock in
some company that had been down for a while because he "felt good about its
future". He had (allegedly) no connection whatsoever to anyone in that
company. The next day an announcement came out that the company was being
acquired for a huge premium. Ended up having to deal with the SEC. He
eventually came out in the clear, but it was still a huge hassle and caused
him a lot of stress.

~~~
AznHisoka
Sounds like a casino alright

~~~
therein
Tell me, why did you bet on 00?

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jacquesm
All it would take is for someone in on the deal to be having dinner with an
associate and saying just a little bit too much. The walls have ears when
you're dealing with stuff like this.

~~~
NegativeK
When do insider trader laws kick in? I seem to remember that acting on
information you overheard is legal; is being told info directly from the
insider (if they don't benefit) also illegal?

~~~
rrauenza
Let's also recall that Congress is exempt:
[http://www.forbes.com/sites/kylesmith/2011/06/01/insider-
tra...](http://www.forbes.com/sites/kylesmith/2011/06/01/insider-trading-
rules-that-dont-apply-to-congress/#689f82cef862)

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rememberlenny
Wasn't there a big LinkedIn hack recently? Would it be ridiculous to think
these two are related?

~~~
btgeekboy
The hack was in 2012. The data recently went up for sale, dredging the hack
back to the top of the news.

~~~
hulahoof
So to play devil's advocate, a relationship between the data leak and
acquisition?

~~~
ryanlol
Why?

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astanway
Buying an abnormally large amount of short dated, out-of-the-money options is
a textbook (and extremely rookie) insider trading move.

~~~
matt_wulfeck
I'm having a hard time knowing they are simply a rookie. They prices the
options right and bought in the last five minutes, so they at least know the
type of resistance they'd encounter from algos.

~~~
valdiorn
It's a rookie trade because they left a bulldozer trail of evidence behind.

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blastrat
I just want to add this bit of Finance Theory / Econ 101 to the mix, it's
interesting:

Markets function better (or really, they function at all, it's the definition)
when prices are what they should be.

Trading on insider information moves prices in the direction that they should
be moving. The flaw in the pricing is due to the secret that's being kept, and
the secret is being kept to protect insiders, not the public.

So, as a counter example to "the tragedy of the commons", trading on inside
information is an example of positive externalities surrounding trades with
negative "internalities".

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princeb
[http://www.bloomberg.com/news/articles/2016-06-13/anatomy-
of...](http://www.bloomberg.com/news/articles/2016-06-13/anatomy-of-linkedin-
options-bet-that-probably-lost-money-chart)

another look at this trade thinks its part of a short vol trade - this kind of
trades lose money when the price moves too much too fast.

the only way this structure would have made money if there was no announcement
about anything - no announcement that there was an acq, or wasn't an acq, or
there was any discussion about an acq at all.

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JackFr
I really doubt it's someone in the banking or tech sector. Anyone with the a
glancing familiarity with the stock market knows that's the easiest way to get
caught.

~~~
jonnathanson
That's why it seems more likely (to me) to be tech sector than finance. Nobody
in finance would make this kind of move. A LinkedIn or Microsoft employee
might.

------
known
Insider trading is NOT illegal;
[http://cnbc.com/id/43471561](http://cnbc.com/id/43471561)

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tmpanon1234act
What's really weird is that's way too small a profit to risk being flagged for
insider trading.

~~~
et2o
Unless that's all you can afford

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secfirstmd
Corruption and allegations of insider trading amongst the banking sector?
Surely not! Who would have thought?

~~~
tobltobs
I think it is obvious that this trade did not originate from someone inside of
the banking sector, else it would have been constructed in a "legal" way.

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qjighap
The linked in 2012 breach started getting posted everywhere in weeks previous
with high visibility. I don't believe it to be related, but I am sure someone
may.

