CBOE probes Associates First, Citigroup options
(probably doesn't belong here, but I couldn't figure out where else to post this...)
---
biz.yahoo.com
Wednesday September 6, 12:38 pm Eastern Time
CBOE probes Associates First, Citigroup options
(UPDATE: Adds byline, details throughout)
by Laura Jacobs
CHICAGO, Sept 6 (Reuters) - The Chicago Board Options Exchange is investigating big option orders to buy the stock
of Associates First Capital Corp. in the two days before Citigroup Inc. agreed to buy the finance company for $31
billion.
The brokerage firm that processed the orders is Citigroup's own Salomon Smith Barney securities unit, according to two
traders.
``The CBOE has initiated an investigation into unusual trading activity in AFS and Citigroup options,'' said CBOE
spokeswoman Lynne Howard-Reed in response to an inquiry.
A Citigroup (NYSE:C - news) spokesperson was not immediately available for comment and Associates First
(NYSE:AFS - news) referred questions to Citigroup.
Traders said Salomon Smith Barney, owned by Citigroup, on Friday and Tuesday bought about 4,000 September 27.5
calls in Associates First, some 3,000 Friday and 1,000 more Tuesday.
A spokesman for Salomon Smith Barney was not immediately available for comment.
Those trades would have comprised the bulk of the options activity in September 27.5 calls on both days. On Friday,
roughly 3,455 Associates First options traded on the CBOE and Amex combined. On Tuesday, about 1,320 options
changed hands interexchange, according to Track Data figures.
During the last month, average daily volume in the option was about 700 contracts.
Theoretically, if the calls had been bought at Tuesday's closing CBOE price of $1-9/16 and sold Wednesday morning at
12, the midpoint between the bid and offer, the trade could have generated a profit of nearly $4.2 million.
Associates First options also are listed on the American Stock Exchange, but Amex spokesman were not immediately
available for comment .
Citigroup options also are listed on the Amex, Pacific Exchange, Philadelphia Stock Exchange and International
Securities Exchange.
Spokesman at the Pacific Exchange and the Philadelphia Stock Exchange each had no comment on the matter. ISE
officials were not immediately available for comment.
The options trades were viewed as unusual partly because those September options, which expire on Sept. 15, had
relatively little open interest and low volume at the time, said a CBOE market maker. He also noted that the firm that
handled the options order, which he said was for a customer, was owned by the company that purchased Associates
First.
``It was entered as a customer order,'' the market maker said. ``I've been down here 15 years and I've never seen
anything this blatant ... The exchange has already been down here asking about it.''
Added Paul Foster, investment strategist with 1010wallstreet.com: ``The tie-in is Salomon Smith-Barney is a unit of
Citigroup. It's interesting.'' |
