A story about alleged insider trading by an informed trader who bought put options on IBB (a biotech ETF) before Hillary made a tweet about ‘Epi Pen’ prices, went viral:
It was also posted on r/the_donald and r/conspiracy
Here is the tweet in question:
EpiPens can be the difference between life and death. There's no justification for these price hikes. https://t.co/O6RbVR6Qim -H
— Hillary Clinton (@HillaryClinton) August 24, 2016
Posted at 11:02 PST.
The options in question are the IBB August 26th 190 puts traded on August 24th, 2016, particularly the 100 puts that were traded. Here is a chart of all the put trades and times for the 24th, for the 190 strike expiring on the 26th:
The 100 contracts, as evidenced by the huge bar, were traded at 8:21 PST. Although this trade was placed well before Hillary’s tweet, the evidence is less damning when you consider that many order were placed before the tweet, not just a single one. It shows over 300 put options traded before the tweet, with some orders (except for the 100 contract outlier) as high as 40 contracts. Had it been a single order placed just before the tweet, yes, it would be suspicious, but seems like many of these puts changed hands by multiple parties.
Also, the trade was made hours before the tweet. If an insider trader wanted to maximize their profits from bad news and minimize uncertainty, they would make the trade much closer to the time of headline.
Here is the chart for IBB on August 24th:
As shown above, IBB began to fall precipitously an hour before tweet, falling from 298 to 294. It fell from 294, after the tweet was made, and ended the day at 286.
This suggests that there were other factors involved in IBBs’s decline besides the tweet. The tweet itself was no the cause of the decline, which was underway an hour before the tweet was made. The decline of IBB also mirrors the S&P 500 for August 24th, which also began to fall rapidly around the same time IBB did. This suggests that someone may have bought those 100 IBB puts not due to informed trading but perhaps because the price momentum of IBB was negative in the hours leading up to the tweet. Also, people buy puts for many reasons: sometimes it’s to hedge or as part of bigger trade.
So yeah I doubt there was insider trading involved. Probably just a coincidence.