Extraordinarily Strong Stock Volume in FXCM Inc. (FXCM)

By Lawrence G. McMillan

FXCM is a trading firm that basically blew up when the Swiss Franc was revalued, a year ago.  At the time, the stock fell from 17 to nearly zero, before it was rescued by a cash infusion from Leucadia (LUK).  In October, 2015, the stock was reverse split, 1-for-10.  New options were never released after that, and the old options (which are for 10 shares of stock, not 100 shares – meaning that an option with a strike of 2, and a price of 0.50 is comparable to a “regular” option with a strike of 20 and a price of 5) are apparently only available for closing trades.  

But suddenly the stock is on a tear, rising from about 5 to 24 in the past two weeks.  The initial catalysts were a potential restructuring of its debt, a stock buyback plan, and an insider stock purchase by a director.  There are also stories that the company has made substantial trading profits with the cash infusion from a year ago.  The stock price rise is out of control now, though, and it’s become a momentum trade (there is only a small short interest, so short covering is probably not a major factor here).  Since the only apparent way to play this is by buying stock, it has very large dollar risk, but may be worth examining.

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