3 Hewlett Packard Com

• Posted by Adam Warner
• on November 12th, 2009

So looks like Deal-mania has struck Silicon Valley.

Hewlett-Packard Co. said Wednesday it is buying the 3Com Corp. networking company for $2.7 billion, the latest move by the world’s No. 1 personal computer maker to expand into more profitable areas than PCs.

….HP’s stock slipped 35 cents to $49.65 while 3Com’s shares leaped $1.96, or 34 percent, to $7.65 in extended trading after the announcements.

Yes, it’s a company whose heyday was at least 20 years ago taking over one who got hot around the internet bubble era. Now let’s start a pool of when HP decides it’s not getting fully valued as a conglomerate and wants to spin off it’s networking biz.

But of course, there’s more to this story than 2 tech dinosaurs hooking up. Yes, we had some good old fashioned options front-running. Not sure who spotted it first, but I’ll go with Option Radar on Stocktwits.

$COMS Nov 5 calls being bought in large blocks, and Dec 5 here

3961 November 5 calls and 3269 Dec 5′s  traded in total, vs. open interest of 964 and 210 respectively. So ….yes, somebody’s bunny had a good nose.It’s about the easiest front-run in the world for the SEC to bust, but then again, it’s the SEC so we’ll see.

I always warn when you see odd call buying not to just go blindly chase the name on the assumption it’s smart money. Lots of pay sites give the impression that they’re all winners because that’s their business model. They’ll track hot volume for you. And in fact, almost every time you see a deal pop, someone will have indeed flagged odd trading. But there’s an awful large number of false positives too, especially right after a big deal as we’ll start seeing more rumors and we’ll look more closely at every rush into calls.

There is certainly value-added seeing interesting options flow, it’s just that it’s not usually a layup like this if for no other reason that smarter money won’t generally make it this obvious in hindsight.

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