By Jordan Maglich, Contributor

In a surprise announcement today, billionaire Warren Buffett’s Berkshire Hathaway announced it had agreed to purchase food giant H.J. Heinz Co. for $23.2 billion, with shareholders set to receive $72.50 a share – a nearly 20% premium to Heinz’s closing price yesterday.  While those shareholders are no doubt counting their good fortune today, it appears that advance news of the announcement may have leaked yesterday afternoon judging by options market trading activity.  Indeed, historical options data shows that trading in the June $65 calls yesterday was nearly non-existent,  with only 14 contracts purchased Tuesday and not a single contract on Monday.  This trend continued into Wednesday, until 1:31:32 P.M., that is.  In a one hour span from just after 1:30 P.M. to 2:30 P.M., over 2,500 contracts were purchased for a total outlay of nearly $92,000.  In less than 18 hours, those same contracts would be worth nearly $2 million more after news of the deal broke. Suspicious Timing Options, which give the holder the right – but not obligation – to buy or sell a security at a specific price on or before a specific date, are favored by sophisticated investors as a cheaper way to bet on the direction of an asset with potentially exponential returns.  As a result, options are often the tool of choice for those who attempt to profit off access to non-public information.  In this example, the Heinz options purchased yesterday appreciated nearly 2,000% after Buffett’s purchase was announced. …read more
Source: FULL ARTICLE at Forbes Latest