What can I do about insider trading activity in stock options that cause financial harm?

[oldnemesis]

1. The company released the news after market close.
2. The decline in price of the stock did not start until after the release.

From this I would conclude there was no significant insider trading on the stock prior to the news release.

It would not be unusual for there to be a spike in put buying just before earnings release... especially if some people suspected it might not be good on the basis of public information... just as there might be a surge in call buying if some people thought the news would be good.

But I think it IS unusual to see a volume spike so far before earnings in front of a bad news announcement.

It would take a subpoena to see who it was that was buying the puts and you can always file a complaint to the SEC. If the SEC sees unusual activity in those puts it could decide to get such a subpoena.

You have no way of knowing without an investigation and subpoenaed information.

It costs nothing but time to complain and seek an investigation.

If I were in your position... I would do it. Someone who knew the news was coming and bought those puts from you BEFORE THE NEWS WAS PUBLIC committed a crime as surely as if they held you up on the street with a Saturday night special.

 

[joezapp]

• If the buyer was motivated why not go for 10+ contracts with a Market Order?
• Or a Limit Order well above the Ask for 10+ contracts ( my broker will fill it at that price or better).
  
• Only 2 or 3 contracts at a time doesn't seem very motivated to me.

The buyer also paid the ask over the course of the trading session. 2 or 3 contracts at a time adds up. It added up to a few hundred contracts, in fact. The exact reason he did not put up the number of contracts he REALLY wanted to buy only he knows. It seems he was disguising it. Not the first time I've seen it.

 

[joezapp]

1. The company released the news after market close.
2. The decline in price of the stock did not start until after the release.

From this I would conclude there was no significant insider trading on the stock prior to the news release.

It would not be unusual for there to be a spike in put buying just before earnings release... especially if some people suspected it might not be good on the basis of public information... just as there might be a surge in call buying if some people thought the news would be good.

But I think it IS unusual to see a volume spike so far before earnings in front of a bad news announcement.

It would take a subpoena to see who it was that was buying the puts and you can always file a complaint to the SEC. If the SEC sees unusual activity in those puts it could decide to get such a subpoena.

You have no way of knowing without an investigation and subpoenaed information.

It costs nothing but time to complain and seek an investigation.

If I were in your position... I would do it. Someone who knew the news was coming and bought those puts from you BEFORE THE NEWS WAS PUBLIC committed a crime as surely as if they held you up on the street with a Saturday night special.

Agreed. I just went ahead and did it. Thanks so much!

Also, you are correct in that the stock movement on the 14th doesn't really reflect the insider trading...only those put options. But that's where the big money was to be made by those privileged.

 

[neke]

Seems you sold the 30 puts. How much did you get? I am guessing about 10cents. So for 40 contracts, we are talking only $400. What is the total volume traded that day. I don't think $400 worth of option would be worth SEC investigation.

 

[lindq]

Seems you sold the 30 puts. How much did you get? I am guessing about 10cents. So for 40 contracts, we are talking only $400. What is the total volume traded that day. I don't think $400 worth of option would be worth SEC investigation.

Not for a single trader. But the SEC does like it when there is a trail of bread crumbs they can follow. And that typically starts with someone bothering to file a report.

 

[OptionGuru]

Seems you sold the 30 puts. How much did you get? I am guessing about 10cents. So for 40 contracts, we are talking only $400. What is the total volume traded that day. I don't think $400 worth of option would be worth SEC investigation.

• But they were trading at about $3.00 expiry Friday.
• Buy-to-close 40 contacts * 100 * $3.00 = $12,000

Open Interest: 1284

 

[joezapp]

Seems you sold the 30 puts. How much did you get? I am guessing about 10cents. So for 40 contracts, we are talking only $400. What is the total volume traded that day. I don't think $400 worth of option would be worth SEC investigation.

Hi neke. You're right-on until the math. The options closed at $3.30. A few hundred contracts sold that day, all between 10 and 15 cents. NONE at the minimum bid of 5 cents...he (they) never bid 5 cents. I can tell you as a long-time seller of options, that is not normal. Very confidant buyer(s) here.

 

[joezapp]

Not for a single trader. But the SEC does like it when there is a trail of bread crumbs they can follow. And that typically starts with someone bothering to file a report.

True, lindq. There are certainly others that got hurt much more than me. I only sold 7 of those few hundred contracts. Hopefully the others will follow what I'm trying to get started.

Is filing a complaint with the S.E.C. THE way, and THE ONLY way, to seek justice with this?

 

[Q3D]

The #1 modus operandi of Wall Street Crooks and trading-for-profit-educator shysters is the principle of plausible deniability, if their actions are disguised so they have a possibility of denying their intent then they are much less likely to be prosecuted/found criminally guilty or libel in civil court.

 

[RRY16]

True, lindq. There are certainly others that got hurt much more than me. I only sold 7 of those few hundred contracts. Hopefully the others will follow what I'm trying to get started.

Is filing a complaint with the S.E.C. THE way, and THE ONLY way, to seek justice with this?

Have you contacted your broker .or do you know what ECN or exchange they traded on? Surely this isn't the first place you came?