Companies make some extra money by issuing options on their stock?

[forex-forex]

Quote from black diamond:

I have been wondering about something related. Can a company trade its own exchange traded options?

I am sure you can't load up on your own puts and stop working, but what rule or mechanism prevents a company from doing this? What does the CFO tell the new guy in the office who proposes the idea after he stops laughing?

One example could be Steve Jobs planning to leave Apple and only his closest friends and family are aware of it and they gradually load up on puts. When it was announced that Jobs had pancreatic cancer (2004) AAPL did take a small hit and it was reported that as much as 25%* of Apples worth is tied up in Steve Jobs.

* I'm not sure the exact percentage but it was very high.

 

[Don Bright]

Quote from black diamond:

Don- Thanks for the repy. But I actually meant why can't the company trade in its own options in the company's account, like the way they do stock buybacks.

That's what I meant by full disclosure. The company can't simply buy and sell their own stock without full disclosure.

All the best,

Don

 

[gnome]

Quote from forex-forex:

One example could be Steve Jobs planning to leave Apple and only his closest friends and family are aware of it and they gradually load up on puts. [/i]

That would be "trading on material, non-public information"... and would be illegal.

 

[ET70424]

Quote from thriftybob:

I recall hearing that MSFT had made money selling puts as part of a buyback program. Not sure if it was true or not, but made good sense as a way to make extra profits at the same time as buying back sharres when the price dropped.

Thanks. You just refreshed my memory. That's what I remember also. MSFT did that for many years while its stock was on a bull run and made a ton of money from the MSFT puts they regularly sold that expired worthless, as I recall the news report.

Assuming that to be factual, which I have no reason to doubt, then there is (or at least was) no legal prohibition against a company selling options (or at least puts) of its own common stock.

Regards.