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Sony hack sends stock down 10% in past week. Time that on option expiry, make zillions. Disclosing vulns, though, I,agree not a stock shorting business. http:
by blazespin 10y ago
Sony hack sends stock down 10% in past week. Time that on option expiry, make zillions.
Disclosing vulns, though, I,agree not a stock shorting business.
http://money.cnn.com/2014/12/15/investing/sony-stock-hack/ http://money.cnn.com/2014/12/15/investing/sony-stock-hack/
- tptacek 10y agoFor that scheme to work, it has to actually work: you need an attack that can damage the fundamentals of a business. Most trades aren't made by randos reacting to the news: they're allocation decisions made by pension funds and endowments and mutual fund firms, all of whom are run by people who understand that if they dump a position when it's down 10% because of the news cycle, they are going to look stupid and potentially lose their job when it turns out that the news cycle had nothing to do with the fundamentals of the company and the stock recovers --- probably not from the hack, but from whatever macro trend is jostling the market that week.
- blazespin 10y agoFalse, options price risk and pension funds don't play in that arena. Way too illiquid.
- tptacek 10y agoI don't understand this comment, which seems to suggest that pension funds, endowments, and mutual funds don't own Sony stock.
- blazespin 10y agoThere is not a 1 to 1 correlation between options and stock price. There is a risk volatility factor as well. Do some options trading and then come back and talk about this.
- qaq 10y agoThey can write covered calls
- blazespin 10y agoPension funds don't.
- qaq 10y agoThey do just a random quote on the subject : "While public pension programs have traditionally stayed away from using options strategies in their portfolios, that is beginning to change. This year, John Colville, Portfolio Manager, disclosed that he was successfully employing options on up to 66% on the equity portion of the City of Sacramento’s pension fund. We also learned that Tim Walsh, former Investment Director with New Jersey’s public pension system had similar success employing covered call options. Most recently we learned that CalSTRS intends to allocate to one or more managers a total of $150 million across both low volatility equity and covered call strategies. Upon evaluation of the performance of this initial allocation, CalSTRS may expand the program in terms of number of managers or capital invested."
- blazespin 10y agoWell, those are long term calls, I can see it being used for hedging (though yikes, I hope none of my retirement funds are doing that, talk about timing the market) Pension funds most absolutely do not speculate in options near expiry.
- thaumasiotes 10y agoWell, assuming you can tell whether you've got an insignificant flash-in-the-pan disclosure or a fundamentally-damaging disclosure, it seems like things are still fine. Break your flash-in-the-pan disclosure, see the short-term price drop, purchase some buy options at the brief, depressed market price. Options to trade at the current market price should be pretty cheap, right? It doesn't matter, for stock trading purposes, whether you're making a permanent change or a temporary one. What matters is that you can predict the effect.
- tptacek 10y agoSure, but my core argument is that there really aren't that many vulnerabilities that how powerful impacts on stock prices. If the markets are essentially a random function, and any given stock a random walk, and the influence you wield is marginal, then you're taking a dangerous bet when you spend money to buy puts. Even if you can predictably harm the price of a stock ceteris paribus, you could easily lose money if your timing sucks and you try to employ your scheme when some macro event (or just a company announcement, or any other instants in the random walk of a stock) sends the stock more-than-marginally upwards. I am not here to question whether Justine Bone can pull this particular scheme off. She picked a perfect target: a product in the medical industry, which is heavily regulated and whose vendors are punished harshly for product recalls, which was in the process of closing an acquisition by another medical industry giant. My point is that Bone's win here is highly situational. That is great for Justine! I have nothing bad to say about her evil scheme. I'm just saying it's unlikely to be the future of vuln research.
- FLUX-YOU 10y agoMaybe we can bundle a bunch of shitty vulnerabilities into a CDO and call them good vulnerabilities.
- shostack 10y agoI guess this begs the question of how many times you really need a perfect candidate (such as in this case) if you are confident in nailing the timing and can get leverage. Doesn't seem like you need a ton of these to potentially make off like a bandit. Of course those are big assumptions.
- lugg 10y agoWhile not an instance of a security exploit, the right tweet can and does result in this sort of insider trading. Options are leveraged vehicles, you don't need to hurt the fundamentals of a business, you only need to ensure short term volatility to make money. https://i.redd.it/ju3joa7i3fhx.png https://i.redd.it/ju3joa7i3fhx.png