Friday, August 05, 2005

Friday Update

Just two things to say before I start my weekend.

The NFL season is going to start fairly soon and I'm going to start my betting. I plan to put a little more detail of my betting than last year and also use more capital. I'll probably post more about this as it gets closer to the season.

Insider Trading
I read this in the Journal today, ridiculous.
Options on Reebok were heavily active before the proposed acquisition with Adidas was confirmed. About 3,675 options (mostly calls) were traded, which is about 20 times the normal volume. This was on Monday, and then another 5,000 contracts traded on Tuesday.
The CBOE said they are going to look in this, but this just seems too obvious.
Just to note: if people know insider information they would rather buy options rather than the stock because of the leverage. For instance $10,000 would get you under 200 shares of Reebok, but (assuming an option premium of 2.00) it would get you 50 option contracts. With these contracts you would control 5,000 shares.

Have a nice weekend!

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