neither short nor long, just local. the first few paragraphs of a lengthy post article in today's bidnez section:
A Suspicious Spike in Manugistics Options Trading
By Jerry Knight
Washington Post Staff Writer
Monday, June 15, 1998
The stock of Rockville's Manugistics Group Inc. has long been a favorite of Washington investors, though most paid little attention to trading in Manugistics' options.
As Manugistics' stock marched from about $5 a share to $60 over the past two years and the company built a reputation as the leader in supply-chain-management software, the American, Chicago and Philadelphia options markets all began trading options, which make it possible to bet on whether Manugistics stock will rise or fall.
But unlike the options on volatile technology stocks such as Dulles-based America Online Inc., which trade very actively, there wasn't much options action on the stable shares of Manugistics.
Betting that Manugistics stock would fall was such a long shot that for days -- sometimes weeks -- at a time, there was no trading at all in the "put" options that would produce a profit if the shares plunged.
But late last month, the betting against Manugistics suddenly got hot.
On May 20, somebody bought 255 "puts" that guaranteed the right to sell Manugistics stock for $60 a share. With the shares already trading near $60, the "puts" would make money only if the stock plummeted.
The next day, more big bets were made that Manugistics stock would sink. Another 140 of the $60-a-share "puts" were purchased and during the day, the price of Manugistics stock started slipping when a securities analyst suggested that the company might be not make the profit that analysts were projecting.
Manugistics officials confirmed the bad news after the market closed on May 21 and the next day the stock went into free fall. It plunged to $29.25 -- less than half what the company's shares had been worth just four days earlier.
The collapse of Manugistics stock made more than $1 million for the investors who were lucky enough to get into the "put" options before the fall.
Lucky? That question is being asked by people who follow Manugistics shares and by Securities and Exchange Commission lawyers, who wonder if someone, somehow, found out in advance about Manugistics' undisclosed problems.
Following its usual practice of not discussing investigations, the SEC will neither confirm nor deny whether it is looking into the fortuitous trading in Manugistics options.
But the word in the Washington brokerage business is that the SEC and the options exchanges immediately spotted the unusually large last-minute "put" purchases and are trying to determine what happened.
Industry sources say the million-dollar Manugistics option play was made by some customers trading through Washington branches of Salomon Smith Barney, the big securities firm owned by Travelers Group Inc.
washingtonpost.com |
