there is one solution. ban all shorting.
MDVN - Options Insider Makes $40 Million in One Minute.
- Thread starter livevol_ophir
- Start date
livevol_ophir
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Quote from failed_trad3r:
there is one solution. ban all shorting.
Nothing was shorted here... That is not a solution.
If it looks like a duck and quacks like a duck...
"Abstract
We find evidence of significant increases in short sales immediately prior to large insider sales, consistent with information leakage and front-running. We examine a number of alternative explanations that the increase in short sales is driven by public information about the firm or about the impending insider sale, but the evidence is inconsistent with these explanations. The result has implications for the enforcement of insider information regulations, and for timely disclosure of short sales information by stock
exchanges."
http://www.rotman.utoronto.ca/newthinking/Lu_Frontrunning.pdf
"Abstract
We find evidence of significant increases in short sales immediately prior to large insider sales, consistent with information leakage and front-running. We examine a number of alternative explanations that the increase in short sales is driven by public information about the firm or about the impending insider sale, but the evidence is inconsistent with these explanations. The result has implications for the enforcement of insider information regulations, and for timely disclosure of short sales information by stock
exchanges."
http://www.rotman.utoronto.ca/newthinking/Lu_Frontrunning.pdf
If? Sorry, it won't happen.
The SEC could basically shutdown insider trading and other illegal things if they were competent and had enough authority. Unfortunately neither is true and thus this continues and I am certain we will see threads such as this 5 years, 10 years and more down the road.
I once complained to the SEC about a co. that claimed millions in sales, profits, etc. (they had/have a stock), but they actually don't exist - they just make money selling shares to unsuspecting people. The SEC could shut them down and arrest the execs. in no time if they wanted to and had the proper authority. Never heard back from them, never saw any action whatsoever taken.
That all being said, I would urge the OP and others to at least report this to the SEC and see if just this one time they can punish the people who are playing these games
JJacksET4
Sorry but you have no way of knowing whether or not the firm who did that risk reversal was long stock already. The prices and the time mean nothing, they may have been long stock from anytime in the past.
IMO the SEC should look into the timing of the options trades and I am sure they will.
Years ago when I was on the AMEX there was a small bank stock that traded in our pit along with some more active stocks we all made options markets in. One day late in the day someone came in and bought 2000 calls which was more than the weekly volume in that bank stock. Sure enough the bank was taken over the next day. It took the SEC all of a few hours that day to start an investigation and the result was that they took the trade down and prosicuted the buyer. Turns out a low ranking employee of the IB who was doing the deal leaked the info to his parents overseas.
IMO the SEC should look into the timing of the options trades and I am sure they will.
Years ago when I was on the AMEX there was a small bank stock that traded in our pit along with some more active stocks we all made options markets in. One day late in the day someone came in and bought 2000 calls which was more than the weekly volume in that bank stock. Sure enough the bank was taken over the next day. It took the SEC all of a few hours that day to start an investigation and the result was that they took the trade down and prosicuted the buyer. Turns out a low ranking employee of the IB who was doing the deal leaked the info to his parents overseas.
livevol_ophir
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I guess we'll agree to disagree. I have never seen anyone hedge 2.6 million shares with a risky on market close trading on 0.80 wide markets in deeps. A hedge is almost always a negotiated trade and almost never in deeps. It's usally 35 delta (ish) negotiated - not 100 delta, at the close, paying awful prices.
I do agree with you on SEC. I hear them get people all the time for stuff like this. Not sure about the negative sentiment here regarding this type of activity.
You guys are really funny. Don't you realize that the only entity that would have sold that position is one of the option shops. You don't think that they scream bloody murder when they get taken like this? They almost always win these disputes too even when there is no proof of insider dealing so don't worry about it, you cant even get lucky against these guys.
livevol_ophir
ET Sponsor
Def right that the shop will complain. Def not a sure thing they get it back. And, one more tid bit - the complaint comes from a trader that got picked bad. They tell their boss. The boss goes to SEC.
SEC responds 6 months later, trader is already gone, firm gets the money...