Are CEOs allowed to sell covered calls on stocks they own?

Pekelo

Pekelo

I am thinking here for a little additional income. Since they own the stock, if they pick a high enough strike price where the stock most likely wouldn't go (thus no danger of being called away), the premium is nice additional profit.

Is there any law or regulation that prevents them doing this? Even if they just do it using a smaller part of their holdings, (so their majority isn't in danger) that could be a nice little extra income...
 
OptionGuru said:
[non answer]
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Was it a yes or a no? By the way, do you know what else is useless? Owning a bunch of stocks and not taking advantage of it...

Let's say the CEO or board member owns 1 million stocks. He could write CCs easily on 100K shares, not to endanger his ownership %, and still make a pretty penny. Specially with big market cap established stocks, a 10% upmove is not very likely, so why wouldn't they use the tied down capital if it is not against any rules???
 
usually CEOs have a overexposure to their company stock as % of their networth. If they are allowed to trade the stock in given period, they are much better off selling shares directly than to decrease their exposure in a small way by selling OTM calls
 
It doesn't look good for a CEO to be selling upside in his stock while telling the world the stock is undervalued.

Heirs of stock (like the JNJ family or the Dupont family) will often write calls for income.
 
Daal said:
If they are allowed to trade the stock in given period,
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You see, writing CCs are not exactly trading the stock. If the CEO has to own X% of the stock for majority or whatever, he might doesn't want/can't give up the stock, but that doesn't mean he can not make extra money by selling premium. Just making an extra 10% annually doubles the income in 7 or so years.

I could pick a major stock that in 7 years didn't go nowhere, but if you sold CCs on it, you doubled you money.


chido said:
Sure, why not?
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Could be considered insider trading. I don't know. But if the CEO suddenly is selling deep ITM options then we can assume he expects a downturn. When he stops selling he expects a rally. So by the nature of his CC selling we could guess his expectations.
 
I am sorry, but Martha Stewart has absolutely nothing to do with CC writing. She went to jail for LYING to the feds (about selling a particular stock) not option trading...

Now let's say if I sell always the same options (3 strikes OTM or whatever) who can say I am insider trading? Or specially if I am using LEAPs, and sell once a year...
 
OptionGuru said:
  • Covered Calls are useless.
  • I doubt any CEO would be interested in CC's.

:)
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Uh...wrong. The right time and the right stock it is easy money. My parents made several hundred thousand selling covered calls on stock they own.
 
WildBill said:
Uh...wrong. The right time and the right stock it is easy money. My parents made several hundred thousand selling covered calls on stock they own.
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You're very gullible if you believe that - or fuck*ng stupid.


:)
 
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