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Using options to smooth volatility is a common technique after M&A and was likely done for him by the same bankers that made the original acquisition. I am sure
by jonknee 10y ago
Using options to smooth volatility is a common technique after M&A and was likely done for him by the same bankers that made the original acquisition. I am sure it was on the up and up.
- beagle3 10y agoSEC enforcement was a joke for years, probably still is. A lot of people are doing this, so, yes it is a common technique, and no, it's not ok - it runs afoul of SEC Rule 144. No action or inquiry from the SEC is a bet that a lot of people are willing to take, and it pays well for most of them. So does lying to the IRS. Personally, I prefer to pay more taxes, and lose some income (I wanted to protect a 5X exit from downside using puts, and my tax/legal guy warned me against it and introduced me to 144. I ended up with a 1.1X return - I've lost 98% of the profit because the buyer's shares dropped 5 months after the purchase for a reason unrelated to the 5X exit I was a part of. Sums weren't life changing either way, in case you wonder).