131–140 of 371 posts
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// unless you're actively regularly trading in the millions. A lot of people/organizations bet in the millions.
Sure, and the SEC investigation will probably figure out if this is one of a thousand daily trades that got placed by the beneficiary, or if he opened a trading account last week, and this is the first time he's buying options.
I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…
I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…
But traditionally in the US insider trading is not about market fairness, it’s about not stealing from shareholders. So if you have no obligation to the company or it’s shareholders you aren’t an insider. The phrase is “breach of a fiduciary duty or other relationship of trust and confidence”.
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It's definitely suspicious and will probably be looked into. If it turns out it's a trader who regularly buys soon-to-be-expiring option calls, maybe it'll fly. But if the trade was made by someone who doesn't regularly make $20,000 options bets, they will need a good explanation.
Why will they need a good explanation? Can't they just say I lucked out and the burden of proving insider trading would fall on the SEC? Innocent until proven guilty right?
But, to start, the SEC will just come knocking and asking questions. If you have a good explanation then they'll go away. But if you don't then they'll keep digging, get warrants, etc.
If it's some random hedge fund that makes these bets all the time then the SEC will probably go away. If it's a broke old lady who opened her brokerage account a week ago then it's pretty clear what's going on, and they'll have the tools they need to turn the screws and get to the bottom of it. And if it's someone whose wife works in Cisco M&A then it'll be pretty open and shut because these kinds of mergers keep track of who had access to what info, for exactly this reason.
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Yes. The one bit you’re missing is that a call option is the right to buy a stock at a certain price typically on or before a certain date. To make the numbers simple, imagine a stock trades at $10/share. If someone came to you and said: how much would you be willing to pay to have an option to buy the stock for $100/share? The correct answer is: it depends. If it’s the right to buy the stock for $100/share at any po…
> And strategy 2 seems especially suspicious because the risk is so high and the non-illegal reasons for doing it are so few and far between. Very few reasons you’d buy a bunch of call options that only pay off if something causes a stock to move dramatically in 24 hours. But why are they then legal to sell? It almost seems like someone wants to be able to sell them, but when they lose the bet they want to revert it.…
Things are legal until there is a law or ruling that makes them illegal
I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…
> Oh, but I didn't pay employees for insider information. I merely overheard it at the bus stop!
Granted, if this really is how someone learns of an acquisition it would be unlikely to get proven in court, and unlikely you'd even get accused as someone with no ties to the company.
That all being said, the clear message from our government is that insider trading is okay. Our politicians do it every week. So don't feel bad about it if you do get a lucky tip.
Earlier quoted context omitted.
Yes. The one bit you’re missing is that a call option is the right to buy a stock at a certain price typically on or before a certain date. To make the numbers simple, imagine a stock trades at $10/share. If someone came to you and said: how much would you be willing to pay to have an option to buy the stock for $100/share? The correct answer is: it depends. If it’s the right to buy the stock for $100/share at any po…
> And strategy 2 seems especially suspicious because the risk is so high and the non-illegal reasons for doing it are so few and far between. Very few reasons you’d buy a bunch of call options that only pay off if something causes a stock to move dramatically in 24 hours. But why are they then legal to sell? It almost seems like someone wants to be able to sell them, but when they lose the bet they want to revert it.…
Earlier quoted context omitted.
Why will they need a good explanation? Can't they just say I lucked out and the burden of proving insider trading would fall on the SEC? Innocent until proven guilty right?
They could probably just tell the SEC, "I think you're a bunch of stupid doodooheads" and see how well that works.
Earlier quoted context omitted.
It's definitely suspicious and will probably be looked into. If it turns out it's a trader who regularly buys soon-to-be-expiring option calls, maybe it'll fly. But if the trade was made by someone who doesn't regularly make $20,000 options bets, they will need a good explanation.
Why will they need a good explanation? Can't they just say I lucked out and the burden of proving insider trading would fall on the SEC? Innocent until proven guilty right?