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Insider trade on Splunk acquisition?

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Re: Insider trade on Splunk acquisition?

#301

Post by ToValueFunfetti »

kossTKR wrote: post #279
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.

As a non-american it's always fascinating to see comments like this downvoted. It's absolutely mostly the poor who go to jail except a few fall guys - it's very apparent. That's class privilege for you guys, and it has been like this for hundreds of years in most societies but only americans seem to "miss" this or whatever the hell is going on. Just as here in the EU, fraud in elite circles shuffles billions every da…

It sounds like you do disagree with the comment you're defending, though- they're suggesting that this is a US specific phenomenon. The US may be worse in this regard, but I don't know where to find relevant statistics (looked into this for ~30 minutes), or how you would go about controlling for the US being both wealthier and more criminal than a lot of the world. Would love to learn more about this!

Part of it is justifiable. The value of a prison is threefold. It's a punishment, and in that sense it shouldn't be exclusive to the poor. But it's also a way to separate violent criminals from the rest of the population, reducing further violence. A financial criminal can just be denied access to the industry to achieve that end. And it's an opportunity for rehabilitation, but that doesn't seem to be a priority in the US anyway.

Re: Insider trade on Splunk acquisition?

#302

Post by lowbloodsugar »

kasey_junk wrote: post #213
lowbloodsugar wrote: post #185

Earlier quoted context omitted.

Unless your wife is the leader of the house.

The Nancy Pelosi case is extremely interesting from a market manipulation point of view! It’s one of the strongest arguments for extreme restrictions on Congress trading. Trumps behavior in office is a similarly strong argument for extreme restrictions on Presidential trading. But it’s not strictly about insider trading. Pelosi (or trump or Pelosis’ husband) are not traditionally insiders. The testimony they receive…

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.

Re: Insider trade on Splunk acquisition?

#303

Post by ghaff »

shortrounddev2 wrote: post #287
ghaff wrote: post #285

Earlier quoted context omitted.

You’re using confidential information obtained in the course of your work duties for personal gain. I’m pretty sure my employer would consider that a business conduct violation.

I'm sure it's against the rules but why is it unethical

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

Re: Insider trade on Splunk acquisition?

#304

Post by jldugger »

tptacek wrote: post #143
eastdakota wrote: post #100

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…

This is great, and as good a place as any for the thread to sprawl from, so I'll ask: it depends on how you know the stock is going to shoot up the next day, right? Trading on private information isn't illegal, and there's a huge variety of ways to acquire private information at varying levels of confidence, and in a sense the purpose of the markets is to aggregate everyone's private information to estimate a price.…

> Say you're, like, an employee at DataDog, and you're involved in a long-term M&A discussion with Cisco that you know is competitive (I've had the pleasure of witnessing one of these at Arbor Networks). Things are looking great, you've picked up a bunch of strong signals that Cisco is definitely going to make a move, and then: the talks fall apart.

I don't know about the law, but where I work insider trading policies also applies to vendor and supplier stocks. Trading on that info would cost me a job, at the least.

Re: Insider trade on Splunk acquisition?

#305

Post by [deleted] »

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?

[deleted]

Re: Insider trade on Splunk acquisition?

#306

Post by francisofascii »

sakex wrote: post #198

Let's say you live in front of the Splunk office, and you see tens of people in suits, a limo with a CISCO sticker, as well as a lot of commotion on the office in front of you. You strongly suspect something is happening, you buy $22k of Splunk calls. Is that insider trading?

And what if you are the caterer being sent to the Splunk office to deliver some lavish celebratory meal?

Re: Insider trade on Splunk acquisition?

#307

Post by owenmarshall »

0cf8612b2e1e wrote: post #291
wallawe wrote: post #249

Earlier quoted context omitted.

Let's say I own a bunch of SPLK and want to make some passive income. I am the counterparty to the call purchaser in this example. I can sell call options 10% out of the money each week and make some nice cash. If my plan was to hold the stock long term, there's no downside risk because if the stock goes down, I get to keep the cash (premium) from selling the calls. If it goes sideways or slightly up I get to keep it…

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 stock at a loss. Worst case you could lose a major chunk of change.

Re: Insider trade on Splunk acquisition?

#308

Post by kasey_junk »

lowbloodsugar wrote: post #302
kasey_junk wrote: post #213

Earlier quoted context omitted.

The Nancy Pelosi case is extremely interesting from a market manipulation point of view! It’s one of the strongest arguments for extreme restrictions on Congress trading. Trumps behavior in office is a similarly strong argument for extreme restrictions on Presidential trading. But it’s not strictly about insider trading. Pelosi (or trump or Pelosis’ husband) are not traditionally insiders. The testimony they receive…

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 shareholders, it doesn't matter how you trade.

Is that the appropriate standard to hold congress people to? I don't know, personally i think, no. But its not obvious that its incorrect from a legal point of view. What fiduciary duty does Nancy Pelosi have to some fund her husband owns? I'm good with a definition that says "once you become a congress person you have fiduciary duty to everyone" but thats not the law now.

Re: Insider trade on Splunk acquisition?

#309

Post by TuringNYC »

slig wrote: post #102
TuringNYC wrote: post #70

Earlier quoted context omitted.

I know options well, but I dont understand how spreads didnt react to this volume. Wouldnt the asks go higher and higher and higher with that volume? Also, what insane market maker would offer this much volume and take the downside risk? It isnt even clear how they would offlay such a risk unless they just happened to be holding 550k*100 SPLK shares

They hedge using the delta of the option and adjust accordingly.

Sure, but the hedge would have raised prices across the vol surface? How did this go thru w/o raising the prices?

Re: Insider trade on Splunk acquisition?

#310

Post by shortrounddev2 »

ghaff wrote: post #303
shortrounddev2 wrote: post #287

Earlier quoted context omitted.

I'm sure it's against the rules but why is it unethical

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
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