Arconic Inc. engineers, manufactures, and sells lightweight metals worldwide such as airfoils forged jet engine components and aircraft parts, aluminum sheets and plates for the aerospace, automotive, commercial transportation, packaging, building and construction. I never heard of this company…until today.
Today, I noticed some bullish unusual options activity. Over 5000 of the April $19 strike price call options we bought, compared to 348 open interest contracts.
So I started to passively do some research and came across an article two months ago that talked about a buyout.
Arconic shares rose as much as 10 percent in after-hours trading on Tuesday following news that Apollo Global Management is in advanced talks to acquire the company. Arconic ARNC shares rose as much as 10 percent in after-hours trading on Tuesday following a report that Apollo Global Management is in advanced talks to acquire the company.
I became more intrigued and found another article written about a month ago.
Elliott Management Corp, the activist hedge fund that sits on Arconic Inc's board, is working to address potential liabilities weighing on the sale process for the U.S. aluminum products maker, according to people familiar with the matter.
By the end of the day Arconic shares were up $1.70 or 10% because of headlines talking about Apollo Global Management LLC is in talks to buy Arconic Inc. for about $22 a share in a deal that could be reached by mid-January. Those options were also up 52% on the day.
Just look how the price spiked at 3:15pm on the 5 min chart today.
And if the buy out is at $22, there is $3 more of upside in the stock, which should translate to about another 100%-200% in the option price (because by that time the the options will be in-the-money).
The Markets are far from random and designed to take money from the uninformed. Unusual options activity lowers the playing field between the informed and the uninformed, but only if you know how to interpret the data. When looking at unusual options activity, one has to look at the strike price vs the stock price, when do the options expire, implied volatility of the options, whether the options were bought / sold at the asking or buying price, etc.
Stay tune for more examples of how the Smart Money continues to back up the dump truck on a daily basis.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.