FOAD you prick. Saw it with my own eyes. Sell any of your shitty option programs today?You're very gullible if you believe that - or fuck*ng stupid.
opps..had you mixed up with the options professor. You can still FOAD!
Are CEOs allowed to sell covered calls on stocks they own?
- Thread starter Pekelo
- Start date
opps..had you mixed up with the options professor. You can still FOAD!
So far nobody knows the correct answer, including google. I assume this must be considered insider trading otherwise we would have heard about this from some sources.
OptiGuru, just a note. This thread is about a specific question and not a debate about CC writing, so kindly stop debating offtopic subjects and fuck off of my thread. Thank you for your cooperation...
OptiGuru, just a note. This thread is about a specific question and not a debate about CC writing, so kindly stop debating offtopic subjects and fuck off of my thread. Thank you for your cooperation...
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Study the flow of replies ..... you will see I was merely responding to a quote of my original post. 95% of the time I always reply if one of my posts is quoted.
call the SEC.
There will be an issue with insider trading if the transaction is done with the expectation of profit (stock drop) based on non-public information, as there is with any financial transaction by corporate directors. Otherwise, while there are no federal regulatory restrictions, the company itself may have restrictions, and the corporate H.R. people need to be consulted.
But I doubt any CEO is going to be comfortable informing the H.R. department that he or she plans to bet against the company's stock price.
You see, it is not a bet against the price. If the price doesn't move the CEO still makes money. Also if the price drops, it protects the investment, so it is anything but betting against the price. Buying puts would be a bet against the price...
I don't know what planet you're on, but on this planet if a CEO was to sell calls against his company holdings, it is a clear signal to other stockholders, and to his board, that he lacked confidence in the growth prospects of the company.
Would you say the same about Cash Covered Puts? The risk profile is the same, but the CEO could say: hey, I am trying to buy more of my stock on the cheap.
Also if the strike price is pretty fair away, the CEO only doubts the SPEED of the growth, not the growth itself. Let's say the stock is at $100 and he is selling $120 strikes one month out, a 20% jump for a big cap stock is usually out of the ordinary, the CEO still could expect 10% monthly growth, which would be still very fine for most investors...
Mind you, the CEO doesn't actually let the stocks to be called away, he is just getting money for the sideways and down movements...
To me, holding a large amount of (specially non-dividend paying) stock is just not utilized...
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Pekelo,
I think the answer to your question is that it depends. In general an insider would have to report all transactions on a Form 4, including options. This is generally required within 2 business days of the action (https://www.sec.gov/investor/alerts/forms-3-4-5.pdf). From an SEC perspective they're free to buy or sell as long as they meet the reporting requirements.
From a contractual and prudence perspective it gets a lot muddier. Many CEO's have restrictions on what they can do with their stock built into their contracts, and they also have to deal with the perception of selling their stock. As previously indicated, selling covered calls strongly suggests to the market that you think your company has little chance of significant short-term upside. It also suggests that the CEO is focused on financial engineering rather than growing the company, also a generally bearish indicator for the market. Selling your stock, on the other hand, could simply indicate that you need the money for something else or you're diversifying your exposure, plus the "bad news" only hits once while selling calls is the bad news gift that keeps on giving. So, while everyone can split hairs all day on if selling covered calls is a good idea or not from a retail investor's point of view, for a CEO it's generally not because of the signal it gives on their own stock.
I think the answer to your question is that it depends. In general an insider would have to report all transactions on a Form 4, including options. This is generally required within 2 business days of the action (https://www.sec.gov/investor/alerts/forms-3-4-5.pdf). From an SEC perspective they're free to buy or sell as long as they meet the reporting requirements.
From a contractual and prudence perspective it gets a lot muddier. Many CEO's have restrictions on what they can do with their stock built into their contracts, and they also have to deal with the perception of selling their stock. As previously indicated, selling covered calls strongly suggests to the market that you think your company has little chance of significant short-term upside. It also suggests that the CEO is focused on financial engineering rather than growing the company, also a generally bearish indicator for the market. Selling your stock, on the other hand, could simply indicate that you need the money for something else or you're diversifying your exposure, plus the "bad news" only hits once while selling calls is the bad news gift that keeps on giving. So, while everyone can split hairs all day on if selling covered calls is a good idea or not from a retail investor's point of view, for a CEO it's generally not because of the signal it gives on their own stock.
Yes, they may sell covered calls. They may even sell short against the box where they may sell calls prior to taking ownership of the shares as long as they will take possession of the underlying prior to expiry of the calls.