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Insider trade on Splunk acquisition?

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Re: Insider trade on Splunk acquisition?

#311

Post by mkii »

sakex wrote: post #226
ar_lan wrote: post #204

Earlier quoted context omitted.

Disclaimer: not financial advice I don't think so, it happened publicly, you weren't privvy to classified details. I would go for it if I were in that scenario.

If it's legal, it means that somebody could write a model that could predict mergers pretty accurately and make a lot of money. For instance, by tracking flight patterns of C-suites executives, scanning car brands in parkings next to offices using satellite images, and analysing working hours of the staff (this can be done in multiple ways like sending e-mails to check of automated OOO responses or analysing the ligh…

Hypothetically, if you assume somebody else will go through all that, wouldn't it be easier to acquire market data and follow unusual trades?

Re: Insider trade on Splunk acquisition?

#312

Post by lowbloodsugar »

kasey_junk wrote: post #308
lowbloodsugar wrote: post #302

Earlier quoted context omitted.

Sure. But the issue is when they have insider information on how a vote is going to go, when the vote impacts stock prices. She has material information that the public does not.

But she's not an insider. The common belief is that insider trading laws are about having data that the market doesn't know. In the US that's just not the basis for the law. In the US there is no expectation that everyone has the same information when trading. The expectation is that people who have a duty to the shareholders are not trading on any non public material information. If you don't have a duty to the shar…

So if I’m a billionaire, I can say I’m going to buy a company, to build up its stock price, and then short it and publicly walk away? That’s fine because I don’t have a duty to that company’s shareholders? I mean sure, can only do it once, but that’s legal?

Re: Insider trade on Splunk acquisition?

#313

Post by vGPU »

mrb wrote: post #275
bryan0 wrote: post #49

Can someone explain the mechanics of this specific trade to a noob? The trader bought 550k options yesterday for SPLK to hit $127/share? Since that seemed highly unlikely they were only priced at $.04 each. but now that SPLK is at $145/share they are worth $18 each? so that would be a profit of ~$10m?

Important note: he didn't buy 550k options, he bought 26k, for a total profit of $475k. The tweet is incorrect. See https://news.ycombinator.com/item?id=37602079

No. He bought 260 options, which translate into the right, but not the obligation to purchase 26k shares at a certain price.

260 options is WSB lotto territory. At $4 each, that’s a thousand dollar bet. We’re not exactly talking big money here.

Re: Insider trade on Splunk acquisition?

#314

Post by outworlder »

shortrounddev2 wrote: post #310
ghaff wrote: post #303

Earlier quoted context omitted.

Because you’re abusing your professional position and employer’s trust for personal gain.

I don't see how, but more importantly I don't see who this harms

> I don't see who this harms

Every trade has a counterpart.

Re: Insider trade on Splunk acquisition?

#315

Post by cezart »

boeingUH60 wrote: post #232
throaway920181 wrote: post #99

Earlier quoted context omitted.

You must be new to the United States. Only the poors go to jail (except in the most extreme cases like Epstein, and it still took them 20+ years to do anything to him.

Wow, I guess SBF is a pauper then.

People like SBF, Holmes etc, fucked over other super rich and often way more powerful people. That's why they are being punished. If they did smth like screw up 5 milion normal citizens for a 1000$ each, they'd still have their billion dollar fraud, but no serious punishment for it.

Re: Insider trade on Splunk acquisition?

#316

Post by outworlder »

IKantRead wrote: post #118
ryanSrich wrote: post #96

Earlier quoted context omitted.

Legally speaking then, it's best to never make trades on any company that you currently or have previously (because you could still have friends that work there) worked for?

Have you never worked for a publicly traded company where part of your compensation is in RSUs? You are only able to trade share's during specific windows of time typically 1 week after earnings are released. Additionally virtually every company I've known has explicit policies stating that you cannot buy/sell any derivatives related to the company stock (which is a shame since buying put options is a legitimate way…

> You are only able to trade share's during specific windows of time typically 1 week after earnings are released.

Just having RSUs doesn't mean that you are trade restricted. That depends on your job function and you can confirm with HR (I had to). In addition, like you say, there are further restrictions if you are sufficiently high up.

Yeah, some companies have restrictions on derivatives, most have restrictions on shorting.

Re: Insider trade on Splunk acquisition?

#317

Post by kasey_junk »

lowbloodsugar wrote: post #312
kasey_junk wrote: post #308

Earlier quoted context omitted.

But she's not an insider. The common belief is that insider trading laws are about having data that the market doesn't know. In the US that's just not the basis for the law. In the US there is no expectation that everyone has the same information when trading. The expectation is that people who have a duty to the shareholders are not trading on any non public material information. If you don't have a duty to the shar…

So if I’m a billionaire, I can say I’m going to buy a company, to build up its stock price, and then short it and publicly walk away? That’s fine because I don’t have a duty to that company’s shareholders? I mean sure, can only do it once, but that’s legal?

:shrug: it’s not insider trading (by historical norms) that doesn’t make it legal. There are other laws that you might be breaking.

Re: Insider trade on Splunk acquisition?

#318

Post by OkayPhysicist »

owenmarshall wrote: post #307
0cf8612b2e1e wrote: post #291

Earlier quoted context omitted.

That still seems like a pretty good deal. You missed out on capturing the entire upside, but lost no real money. Loss aversion and all that, but it feels like a reasonable strategy where you still come out ahead in the worst case. In the typical case, you can continue to collect those pennies.

> In the typical case, you can continue to collect those pennies. Top notch comment, considering options trading is often described as "picking up pennies in front of a steamroller." > Loss aversion and all that, but it feels like a reasonable strategy where you still come out ahead in the worst case You don't come out ahead in the worst case – the option you wrote can settle deep ITM and you are compelled to sell a…

> You don't come out ahead in the worst case

But you were offering it based on the market price when you offered it. The "loss" is merely one of opportunity, you're not actually losing any value you had when you sold the option, right?

Re: Insider trade on Splunk acquisition?

#319

Post by jjav »

matsemann wrote: post #145
X6S1x6Okd1st wrote: post #135

Earlier quoted context omitted.

> But why are they then legal to sell? Things are legal until there is a law or ruling that makes them illegal

It just feels like a casino, where if you win you get sent to jail. No risk for the house. No upside for the gambler.

Well no, because there is nothing illegal about the trade itself nor the profit.

What's illegal is to use insider info to make the decision to do the trade. Did the entity making this trade use insider info? We don't know. If they did not, nothing wrong with the trade.

Now, the circumstances are such that this reeks of insider info. Nobody sane would have done that trade otherwise. So hopefully the SEC will investigate fully. If it turns out the trader really did not have any connection to either of these companies and had no knowledge of the acquisition and simply made the luckiest bet of their life.. then that's fine.

Re: Insider trade on Splunk acquisition?

#320

Post by 0cf8612b2e1e »

owenmarshall wrote: post #307
0cf8612b2e1e wrote: post #291

Earlier quoted context omitted.

That still seems like a pretty good deal. You missed out on capturing the entire upside, but lost no real money. Loss aversion and all that, but it feels like a reasonable strategy where you still come out ahead in the worst case. In the typical case, you can continue to collect those pennies.

> In the typical case, you can continue to collect those pennies. Top notch comment, considering options trading is often described as "picking up pennies in front of a steamroller." > Loss aversion and all that, but it feels like a reasonable strategy where you still come out ahead in the worst case You don't come out ahead in the worst case – the option you wrote can settle deep ITM and you are compelled to sell a…

Clearly I am not an option trader, but so long as you own the option you are selling (covered) doesn’t that make your maximum loss the stock itself (+potential profit from the positive movement). I thought ruin can only happen if you are selling naked?
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