| NEW YORK
NEW YORK Feb 6 A surge in bets that shares of
Green Mountain Coffee Roasters would rise sharply by the end of
the week has raised suspicions, coming as it did just hours
before news of a partnership deal with Coca-Cola.
Green Mountain said late Wednesday Coca-Cola bought
a 10 percent stake for $1.25 billion and would help launch Green
Mountain's new cold-drink machine, planned for release as soon
To be successful, many of the bets - call options conferring
the right to buy Green Mountain shares at a specific price
before midnight Friday - required the shares to rise to $90 or
$95, roughly a 12 percent to 18 percent increase over two days.
The shares, which closed at $80.88 on Wednesday before the
announcement, were up 26.5 percent at $102.29 on Thursday
afternoon. Earlier they traded as high as $110.50.
"We noticed the out-of-the-money ones which were definitely
a bit suspicious. To wait until the last minute before some sort
of announcement to buy something that expires so soon, that does
raise an eyebrow," said Ryan Detrick, senior analyst at
Schaeffer's Investment Research in Cincinnati.
A call option with a "strike" price significantly higher
than that of the underlying stock is described as being out of
"It's safe to say that if they bought (the contracts)
anytime yesterday, they easily made over 1,000 percent near the
open today," Detrick said.
The total volume of call options, which generally convey
bullish expectations for a stock, surged in Green Mountain on
Wednesday, jumping to 53,681 contracts from a recent daily
average of about 13,000 contracts, according to options
analytics firm Trade Alert.
The $95 strikes closed on Wednesday at 46 cents per
contract. Since one contract accounts for 100 shares of a stock,
a purchase of 1,000 call options would cost about $46,000. Those
options were trading on Thursday at $10.10 per contract, which
would make 1,000 calls worth about $1.01 million.
Among the biggest open interest changes were in the $90
strike call, which added 2,688 contracts to bring open interest
to a total of 4,553 contracts, and the $95 calls, where volume
of 1,695 contracts brought open interest to 2,475, according to
Suspicious activity in options market ahead of major
announcements is not new. While some of the bets could be pure
speculation, regulators have been increasing their surveillance
of suspicious action prior to big announcements.
The CBOE's Department of Market Regulation "does review
unusual trading activity on a regular basis," a CBOE
spokesperson said, but it does not comment on any specific
situations. A spokesperson for the U.S. Securities and Exchange
Commission declined comment.
A spokesperson at Green Mountain did not immediately respond
to requests for comment.
In addition, the company reported earnings on Wednesday, and
expectations headed into the report was for a move of about 15
percent in the shares. Activity in bearish put options was also
greater than normal, according to Trade Alert.
"Green Mountain had earnings coming out and implied
volatility was high since earnings are a big deal anyway to the
company," said Brian Overby, senior options analyst at TradeKing
in Charlotte, North Carolina.
"But if something way out-of-the-money (contracts) were
bought for the open and weren't closing for anything, that is
In August, a former Green Mountain employee was charged by
the SEC with participating in an insider trading scheme, where
bets would be made using out-of-the-money options prior to