SEC Sues Unidentified Traders Over Suspicious Activity Before The Heinz Deal

[ktm]

Quote from luisHK:

Thanks Ktm, I thought you meant something else than vanilla options trading. Buying front month otm calls and selling ditm puts will hardly make the trade less suspicious though.

He was very likely to get caught no matter how he put it on, as evidenced by the Swiss acct etc... If you're going to totally break the law in such an obvious way, go big or go home.

 

[atticus]

Quote from ktm:

Without giving it much thought...the calls were JUNE 65 and were 30 to 40 cents I think. Again, I haven't looked at the chains, but how much were the Feb calls (or even March) if the June calls were 30 cents? .05 maybe...to $7.50...divided by $90,000. You'd make 6X to 8X more right there.

Then sell a load of Feb $72.50 puts in addition to buying the calls.

This is just basics. I think with some right sized condors and fly's you could probably improve upon this even more. Depends on how much powder the guy really had, the broker, whether he was reg T or PM etc...

The position becomes synthetic long shares if you sell the puts. Slightly less req than buying the stock outright. Best to stick to dime calls. It's academic as they've got him.

 

[bwolinsky]

Even if they do, the dreams about banking "TOO MUCH MONEY" leading to a man-hunt and painting guilty before proven innocent is not the right type 2 error.