Well-timed trades in GreenSky options ahead of Goldman deal raise eyebrows

NEW YORK (Reuters) - Some well-timed trades in the options on GreenSky Inc, in the days before Goldman Sachs announced a deal to buy the digital lender on Wednesday are raising eyebrows among options analysts.

Goldman Sachs Group Inc on Sept. 15 said it agreed to buy GreenSky, a fintech platform that provides home improvement loans in a deal valued at $2.24 billion.

Options trading volume for GreenSky showed 36,000 contracts changing hands over the five days before the deal was announced, up from a daily average of around 1000 contracts a day, according to Trade Alert data. The trades were reported earlier on Friday by CNBC.

The Sept. 10 strike contracts, which traded at about 10 cents a piece before the deal, soared to trade at an average price of $1.81 after the deal was announced Wednesday. GreenSky shares jumped 53% on news of the deal.

With the stock trading between $7.77 and $9.12 in the five days before the deal, call options betting on the shares rising above $10 by Sept. 17 were particularly busy, with about 3,400 contracts traded in the five days immediately preceding the announcement.

“Buying out of the money short term calls is one of the most aggressive trading strategies in options,” said Brian Overby, senior options analyst at Ally Invest.

There were similarly aggressive trades in several other strikes and expirations.

“Looks awfully suspicious to me,” said Ophir Gottlieb, chief executive of Los Angeles-based Capital Market Laboratories.

“Clearly something was known and I say that because of the size of the trades and the expiration date,” he said.

“I’ve looked at order flow many, many times. This is one of the more obvious ones,” Gottlieb said.

The U.S. Securities and Exchange Commission scans for unusual trades ahead of news announcements and has used such data to bring insider trading probes in the past, public filings show.

“If I was a market maker ... I would report these trades,” Matt Amberson, principal at options analytics firm ORATS, said.

The SEC and Goldman Sachs declined to comment on the trading. GreenSky did not immediately respond to a request for comment.

Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Marguerita Choy