Leap Wireless calls spike before deal

AT&T signage
Etienne Franchi | AFP | Getty Images

Did someone know something early in Leap Wireless?

The prepaid-cellular company normally trades barely 1,200 options contracts in a session, but volume spiked to almost six times that amount on Friday. The activity was almost entirely bullish, as buyers snapped up the August 9, July 9, and October 8 calls, according to OptionMonster's real-time tracking systems.

Leap Wireless closed at $7.98, up 2.57 percent on the day, but the real fireworks came after the close. That's when AT&T announced that it would acquire the company in a $4 billion deal, including debt, which translates to a price of $15 a share. The stock leapt in extended hours, more than doubling to over $17 amid speculation the offer will be sweetened.

Those call buyers now stand to make a fortune. The August 9s, for instance, mostly traded for $0.42 but will be worth more than $8 if Leap Wireless holds its price from late Friday. The October 8s, bought for $1.03, will likely fetch more than $9, and the July 9s will probably soar a ridiculous 8,700 percent from their $0.09 entry price.

Maybe those buyers just got lucky, but Friday's activity suggests otherwise. Also consider the fact that more than 80 percent of Leap's option volume occurred in the final two hours on a summertime Friday session, when the paper was unremarkable elsewhere in the market. The popular SPDR S&P 500 fund, for instance, drew just one-third of its average flow in the same time frame.

The question now is whether someone will end up in prison for insider trading.

—By CNBC Contributors Jon "DRJ" Najarian and David Russell

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Jon "DRJ" Najarian is is co-founder of OptionMONSTER and TradeMONSTER, and co-lead analyst for the InsideOptions trade idea alert systems. David Russell is a reporter and writer for OptionMonster. Neither Najarian nor Russell has any positions in LEAP.