I’m sure you’ve heard the news by now… LVMH, the parent company of Louis Vuitton offered to buy out Tiffany’s (TIF) for $14.5B.
If you were up bright and early to catch that headline, you would’ve been lucky to make a few percentage points.
But the thing is… we all know there are massive hedge funds out there and Wall Street “insiders” who have access to non-public information.
We’ve all seen character portrayals of Wall Street’s greediest traders who place massive bets on insider information… and it’s really not that far from the truth.
We actually saw an options trader(s) grab hundreds of contracts in TIF for under $2 a piece… and just a few days later, those call options were up more than 1,500%!
It’s quite clear we’re at a disadvantage. However, I’ve actually figured out a way to level the playing field with my Dollar Ace system… and legally take advantage of these insiders’ every move.
Let me set the stage for you and show you how you can spot these plays… all the time, as well as a potential “sympathy” play.
Did Someone Know?
Prior to the LVMH takeover announcement with Tiffany’s (TIF), the stock was trading about $98.
However, there was some unusual options activity (UOA) in TIF.
There were actually 3 trades that looked interesting:
- 323 TIF Feb 90.0 Calls bought for $6. That’s about $194K in premium.
- 325 TIF Nov 29th $105 calls bought for $1.561.
- 281 TIF Nov 29th $105 calls bought for $1.472
Those options were all purchase lasted week.
So why were they so interesting?
Well, the call options expiring on Nov. 29th were pretty interesting.
The “insiders” threw down a $41K bet… followed by a $51K bet, just over a minute later in the options expiring on Nov. 29th. That’s a pretty sizable bet there.
Here’s the kicker — there was no open interest in those call options… and it was a clear signal those options buyers must’ve known something.
You can probably wonder no one is throwing down mid-five-figure bets on “long shot” trades…
… instead, they have a clear definable edge.
Those options were purchased last Thursday… and on Monday, those call buyers were sitting pretty.
Tiffany’s gapped up around 30 points higher… and those options were worth more than $22.
That $51K bet turned into more than $770K and the $41K bet turned into over $615K.
The most interesting part was the fact that the offer price came out to be around $120. However, the stock hit $130 that day… providing us with a clear signal that traders think TIF could receive a higher bid than $120. Right now, I’ll continue to monitor the situation in TIF and make sure I’ll let them know if I place a trade on this name.
Right now, there’s actually a potential sympathy play.
What do I mean by “sympathy” play?
It simply lets you know whether a stock could move in tandem with another one.
When there’s a massive news catalyst like the one in TIF… traders start to blast through tickers, in an attempt to find the ones that move with TIF.
The Sympathy Play
I actually stumbled upon Signet Jewelers (SIG).
Signet Jewelers runs the jewelry game.
This company is pretty much every single jewelry store you have crossed paths with. You are probably asking yourself “I’ve never seen a Signet store, so how would I have somehow crossed paths with one?” maybe you are going as far as thinking “But Signet Jewelers is a familiar name”.
“Every kiss begins with Kay” and “He went to Jared” are two well-known slogans to companies you think are opponents in the jewelry world.
But the reality is Kay Jewelers, Jared, Zales, Ernest Jones, Peoples, Piercing Pagoda, and even more operate under Signet Jewelers.
SIG is in a consolidation area right now, and it could catch a bid and run higher…
… who knows, we could see some UOA in SIG.
If you missed out on the TIF trade… don’t worry because there are plenty of trades out there like that (maybe not the same percentage returns)… and there’s only one way to take advantage of them — by joining Dollar Ace right now.[Ed.note: Kyle Dennis runs BiotechBreakouts.com. He is an event-based trader, who prefers low-priced and small-cap biotech stocks.
Source: BiotechBreakouts.com | Original Link