As reported late yesterday afternoon, the SEC alleges insider trading in NXY, which we had cited for unusually heavy options activity just prior to the takeover by CNOOK:
"In a complaint filed in US District Court in Manhattan, the SEC alleged Well Advantage and other traders had material, nonpublic information about the impending bid. CNOOC and Nexen each trade on the New York Stock Exchange.
Well Advantage purchased 831,000 Nexen shares on 19 July and had an unrealized trading profit of $7.2mn by the close of trading the day of the announcement. Well Advantage had no history of buying Nexen stock, the SEC said. Well Advantage then placed a sell order to liquidate its position in Nexen yesterday.
Traders in Singapore purchased more than 676,000 Nexen shares in the days leading up to the announcement after demonstrating scant interest in Nexen previously. Those traders sold their shares almost immediately, earning about $6mn, the SEC alleges.
The SEC managed to freeze $38mn in assets. The agency's investigation continues."
Here is our first post from Monday July 16th, citing the unusual activity in NXY options. We did follow up with a second post Friday July 20th, one that Pete made his final trade on CNBC's Fast Money Halftime report that same day:
In addition to the two posts from OptionMonster's InsideOptions Pro service, here are some additional data points about the NXY activity prior to this past week's takeover bid by CNOOC:
Friday July 20th, 24,500 calls traded in NXY versus 11,700 puts
Thurs July 19th, 400 calls traded in NXY versus 70 puts
Wed July 18th, 600 calls traded in NXY versus 10 puts
Tues July 17th, 10,700 calls traded in NXY versus 10,200 puts
Mon July 16th, 10,800 calls traded in NXY versus 11,000 puts
The average DAILY call activity in NXY over the previous month (June, 2012) had been just 59 contracts. Thus the extraordinary volumes on Friday the 20th, Tuesday the 17th and Monday the 16th are prime examples of massive informed orderflow reacting to material, non-public information. This is why when the CNOOC takeover was announced we said we believed when the regulators looked into the data it would show the trades, stock and options likely cleared in overseas brokerage accounts.
The good news is the SEC appears to have nailed some of the bad guys that profited from insider trading, but thus far, just those that traded stock ahead of the takeover. The players that followed up the stock trades with options are yet to be identified.
