Trading in options to buy shares of MedImmune Inc. surged to the highest in at least 11 1/2 years during the two days before the Gaithersburg biotechnology company announced that it was exploring a possible sale.
The number of MedImmune call-option contracts traded Tuesday and Wednesday was 62,485, the largest two-day total ever, according to Bloomberg data that go back to September 1995. MedImmune said yesterday that it was considering a sale amid interest from major pharmaceutical companies and pressure from shareholders.
"Somebody out there either had knowledge or good timing on their speculation," said Pete Najarian, co-founder of optionmonster.com, a provider of financial data on unusual activity in stocks, options and futures. "This has been a story that's been out there for a while, that MedImmune could be a candidate for something."
The Securities and Exchange Commission has been monitoring well-timed options bets. In March, regulators froze more than $5.3 million in profits from suspected insider trading of TXU Corp. stock options that were bought days before a $44 billion takeover proposal was announced.
Mirant Corp. options trading surged almost 32-fold to a record during the last trading session before the electricity producer said Monday that it might put itself up for sale.
Call options give investors the right, but not the obligation, to buy shares of a company at a specified price by a given date. Many investors buy and sell options before the expiration of the contracts, speculating on the value of the options themselves without the intention of converting the securities into stock.
There are option contracts to buy MedImmune stock at $37.50 by April 21, in May at $40 and in June at $40. The April 21 contract was the most actively traded in the two days before the possible sale was announced, although volume on the other two contracts was nearly as high.
MedImmune shares closed at $43.63 yesterday, up $5.79.
Chicago Board Options Exchange spokeswoman Lynne Howard-Reed said the exchange monitors for unusual options trading, but declined to comment on MedImmune.
John Nester, a spokesman at the SEC, also declined to comment.
"I don't think it's suspicious," said Gregory Robin, chief options strategist at Rochdale Securities in New York, referring to the timing of the options trading.
"I see this a lot with health-care companies and eight out of 10 times the options expire worthless because there's no comment from management and there's no takeout," Robin said.