* 3Com stock is up 35% (at $5.69) in after-hour trading because HP is offering a premium to the current stock price to acquire it. A call option to buy the stock for the fixed price of $5 (until it expired next Friday) sold for 80 cents when the market closed.
* 3Com is up 2 bucks (35%) in the after market. The value of that call option will increase by around that mount. So the price of the option went up from 0.80 to ~2.80. That is an increase of 250%, which is way higher than 35%. This leverage is one reason people trade options.
* The option buyer used a market order ("bought on the ask") to buy a ton of options, which is executed immediately at current market price. More cautious buyers tend to use a limit order in markets that don't trade a lot (like this one). A limit order will buy at no more, or sell at no less, than a specific price. This will move the market price less.
* Given that the acquisition was announced later today, this large order of options is suspicious. This trade will almost certainly be investigated by the SEC.
* 3Com stock is up 35% (at $5.69) in after-hour trading because HP is offering a premium to the current stock price to acquire it. A call option to buy the stock for the fixed price of $5 (until it expired next Friday) sold for 80 cents when the market closed.
* 3Com is up 2 bucks (35%) in the after market. The value of that call option will increase by around that mount. So the price of the option went up from 0.80 to ~2.80. That is an increase of 250%, which is way higher than 35%. This leverage is one reason people trade options.
* The option buyer used a market order ("bought on the ask") to buy a ton of options, which is executed immediately at current market price. More cautious buyers tend to use a limit order in markets that don't trade a lot (like this one). A limit order will buy at no more, or sell at no less, than a specific price. This will move the market price less.
* Given that the acquisition was announced later today, this large order of options is suspicious. This trade will almost certainly be investigated by the SEC.