Following other BAI
stories on Cloudera’s
social media volume,
a jump in share price,
and a surge in options
volume, this story
reported that Carl
Icahn had disclosed a
stake in the company.To see data in the
Trace Market Flow
(TFLO) function,
click here.Click here to subscribe
to the alert on a list of
securities.Here, trading in Mylan
bonds was more than
twice the average.To see Icahn’s 13D
filing, click here.Fig. 3 This alert publishes when an activist investor files a 13D disclosing a stake in a company.Fig. 2 Stories on Trace volume spikes let you know when trading in a company’s bonds
is twice the average.Jordan is an equity derivatives market specialist at Bloomberg
in New York.When the market reopened, the September $20 calls rose by as
much as 140% from the time of the first alert.
Cloudera: An Activist Stake
A third example started on July 31. A BAI alert that day reported a
jump in Cloudera Inc.’s implied volatility, bringing it up to the 83rd per-
centile. The next day at 10:15 a.m., another alert noted that volatility
dropped. But subsequent BAI stories noted that social media volume
climbed, the company’s share price rose the most in six weeks, and
options volume surged again, led by the February $5 calls. At 4:39
p.m., yet another BAI alert revealed that Carl Icahn had reported a
12.62% stake in the Palo Alto, Calif.-based software company in a 13D
filing with the U.S. Securities and Exchange Commission (FIG. 3).
An options trader who was skeptical of all of those
“ coincidences” could have profited. The 13D announcement sent
Cloudera shares up 20% in after-hours trading. The February $5 calls
could have spun profits of as much as 30% when the market reopened.BAI IS ESPECIALLY POWERFUL for derivatives because of options’
leverage and the integral nature that volatility plays in their prices.
These characteristics often result in a very small window of oppor-
tunity for a trade to be profitable—or to exit a potentially loss-
making position. Any advance warning of a potential move, there-
fore, is highly sought after by options traders. The edge in timing
that BAI delivers can be extremely valuable.46