A tweet from Carl Icahn regarding Apple sparked speculation around another Icahn holding, Nuance. And in a flurry of options trading that followed the tweet, traders appeared to wager that Icahn would suggest that Apple buy Nuance, which would likely send Nuance shares far higher.
On Wednesday afternoon, Icahn tweeted:
After the tweet, options activity on communications technology company Nuance spiked, with traders buying thousands of short-term bullish options contracts. On a day when more than five times Nuance's average daily options volume traded, the most active options strike was the October 15-strike call, which saw 7,126 contracts trade over the course of the day at an average price of 25 cents.
Nearly the entirety of that activity came after Icahn's tweet, with volume in the options contract peaking around 3:00 p.m. EDT. And as traders bought, the price of that option rose considerably, from 10 cents at 10:41 a.m. EDT to as high as triple that at 3:00.
These calls will only make money if Nuance shares close above $15.25 on Friday, Oct. 17.
"Basically, traders expect Nuance to be up sharply in the next week and a half," said Mike Khouw of Dash Financial, who added that the traders were likely responding to widespread Wall Street speculation that Icahn would push for an Apple acquisition of Nuance.