6 ms·

GOP Rep. on cyber committee dumped MSFT shortly before $10B contract scrapped

176 points by fooey 5y ago

webinvest 5y ago
It sounds like he bought MSFT stock and then sold a call option on it. Selling call options is a profit and risk reducing betting strategy where you sell rights (but not an obligation) to the buyer to call away shares at a fixed “strike” price between now and an agreed-upon expiration date in exchange for a modest fixed premium. The stock price went over the strike price before the expiration date and were called away from him. Looking at Microsoft’s price chart, over the last 5 YEARS, you would have never lost money over any 4 month period (fiscal quarter) by just simply holding MSFT shares —- and that’s before adding in the increasing quarterly dividends! Here’s an reasonable analogy for article writers that understand baseball more than options and stocks: 1) Selling call options like this Rep did is like bunting the baseball. This is where you hold the bat sideways and let the baseball tap on the bat. No chance of missing the ball but you can only get 1 base. 2) Buying and holding stock is like hitting the baseball your normal way. It’s the most common strategy. Maybe you’ll hit a home run, maybe you’ll get a few bases, maybe you’ll strike out. 3) Buying call options is like swinging for a homerun each time. You often run the risk of someone catching the ball or you miss hitting the ball but when it works, you hit it big. In terms of baseball, swinging normally/commonly is the best strategy… do you agree? Next is aiming only for home runs. Last is bunting the ball or copying what this rep does.
shdh 5y ago
Insider trading
deleted 5y ago
[deleted]
adamdusty 5y ago
The article glosses over huge details. It sounds like he bought options back in May and some time between May 26 and June 21, he used the position to sell an options contract which the buyer exercised on June 21. I'm not highly educated on the market, but it doesn't seem that unusual to me.
- samspenc 5y ago
  Yeah if the buyer exercised the right to buy the option, the seller has no choice, oftentimes it just "disappears" from their brokerage account and shares show up in the buyer's brokerage account. It's also possible he planned to roll the option to a future expiry date, but forgot to get around to it, resulting in the option landing ITM (In the Money) which allowed the buyer to exercise their option to buy.
  - chris11 5y ago
    Details are kind of beside the point. Like you mentioned he could have had several trading strategies. He also could have changed his mind based on insider information. That's why I believe it would be much better to require politicians to file a public 10b5-1 type plan for investments.
    - AmericanChopper 5y ago
      If you had insider information that you though would adversely impact the price of a stock you’re holding, selling OTM calls against it would not be a valid way to attempt to offload your position. The thesis put forward in the article for why this is a suspect trade doesn’t make any sense, and seems to intentionally be conflating selling stock with being assigned.
  - pbourke 5y ago
    The point is “don’t be fucking around with options if you’re a US Congressman trading options in a company regulated by your committee”. I favor the broader “Don’t be fucking around with derivatives or single names if you’re a US Congressperson”
- hn_throwaway_99 5y ago
  If you want to be a US Congressman, especially one on a cyber subcommittee, you shouldn't be trading options in individual tech stocks, period. Stick your money in an index retirement fund like the rest of the plebes.
hn8788 5y ago
Gotta love how open with their biases the article is. They make sure to spell out Republicans multiple times throughout the article, but put "D-N.J." for the Democrat from New Jersey.
- AmericanChopper 5y ago
  They also seem to have no idea what a covered call is, or how assignment works. Never heard of getting assigned as “dumping” a stock before. Either that, or ya know… the author is being intentionally misleading.
  - MathYouF 5y ago
    One has to wonder, if demand for unbiased, non-partisan, reasonable, complete, measured, historically aware, accurate, non-inflammatory political news coverage exists, why is it only available via C-Span? Seems like the American public have either been worn down into non-engagement or radicalised, and I think it's a combination of the designs of politicians (the partisan game is simpler to play and costs less and is more predictable than the one that is focused on societal progress) and that a lot of people would rather believe that the only thing between us and a better society is the evil 50 senators in the other party. Distracts them from having to take personal responsibility for their contribution (or lack thereof) to society and that many of our problems don't have obvious legislative solutions.
    - AmericanChopper 5y ago
      I don’t think it’s much different than it’s ever been before. There’s always been efforts to control information (aka propaganda), and when people are confronted with propaganda they disagree with I think they naturally gravitate towards propaganda that they do agree with. The way this conflict escalates doesn’t typically resolve around disputed “facts” at all. I would say it typically revolves around disputes in the interpretation of facts, or the attribution of motive, or the likelihood of particular outcomes… These interpretations or opinions are naturally quite seperate from “the facts”, but the appetite for propaganda demands that each faction asserts their own interpretation as “the correct interpretation”. This article for instance doesn’t really present many disputed facts. But it does describe what it believes was the motive for a particular decision, and asserts that this explanation is clearly the correct explanation. I think this sort of thing has been around forever, and the only thing that’s different now compared to 20 years ago, is that the internet has made controlling the flow of information a slightly more efficient endeavour.
quickthrowman 5y ago
It’s his loss, MSFT is up another 10% since June 21.
busymom0 5y ago
Congress and Senate from both parties are equally corrupt when it comes to insider trading but this article makes zero mentions of Democrats. The bias in these articles is incredible. It states: > Sen. Richard Burr of North Carolina and former Sens. David Perdue and Kelly Loeffler of Georgia, all Republicans, drew scrutiny for their own pandemic trading last year as well. But it amazingly excludes Sen. Dianne Feinstein, a Democrat who did the exact same thing with covid trading. Nor does it mention Nancy Pelosi, worth $250 million, who claims she has no idea of her husband's co-incidental perfect stock trades. The article mentions Tom Malinowski but only puts "D-N.J." next to his name but puts the full "Republican" and "GOP" next to other names. Data: Unusual Stock Trading by Whales in US Congress: https://unusualwhales.com/i_am_the_senate/congress https://unusualwhales.com/i_am_the_senate/congress Unusual Stock Trading by Whales in US Senate: https://unusualwhales.com/i_am_the_senate https://unusualwhales.com/i_am_the_senate > For example, Pelosi in Dec 22 was against more stimulus. Her husband buys deep ITM TSLA and AAPL calls that day. December 23rd, she is suddenly for stimulus again, with those same companies ralling 5%, giving her an instant +30 return. > Congressman Gottheimer is absolutely an incredible options trader. He’s been selling calls at peaks on $MSFT all 2021, & seemingly buying back the contracts on dips. This in blocks of $250,000 - $5,000,000, which is incredible size given the amount of $MSFT shares he owns. For ex, on 02-12 he sold 500k $MSFT $160 strike expiring 06/18/2021. On that same day, he bought deep ITM calls of $1M-5M at $145 expiring 03/19/2021. The whale caught both of his movements as well. In congress, Democrats are worse. In the senate, Republicans are worse. Pretending that only one side does it shows the author doesn't care about the actual problem of corruption but cares about scoring political points.
- zthrowaway 5y ago
  Came here to post similar points. I expect nothing less from Salon…
irjustin 5y ago
I'm all for the pitch forking when it makes sense, but the congressman has a decent out which wouldn't be hard to prove. > In the audio recording, Fallon backed this up by outlining the trade as an option call in which he purchased a block of $250,000 in Microsoft shares on May 26, and subsequently sold the rights to other investors to purchase at a later date. Those other investors chose to purchase the shares on June 21, according to disclosure reports, effectively liquidating Fallon's position in the company just two weeks before the high-profile JEDI contract fell through. He purchased a bunch of stock, or ITM (in the money) options - either way he then sold covered call options (good safe bet). Those sold call options went ITM and someone exercised forcing his position to be liquidated. Purchase a stock, sell call options to make a bit more money or as a "hedge" against the stock going down. Either way, classic strategy. It didn't really work this time because the stock went up too far, out of his expectation which limits the gains to the value of the options sold. But again, it's a relatively safe strategy.
- refenestrator 5y ago
  If taking the job of congressperson required a blind trust, it wouldn't be an issue.
- RobRivera 5y ago
  100% well demonstrated. plain old covered calls selling.
- foobarbazetc 5y ago
  It doesn’t even matter because Congresspeople can “insider” trade like this —- it’s not illegal. I think Sen Gillibrand has a bill to address this called the STOCKS Act which she introduces every Congress but it never goes anywhere.
  - nr2x 5y ago
    Exactly, insider trading for congresspeople is totally legal and utterly unethical.
  - irjustin 5y ago
davidw 5y ago
People in Congress should not be buying and selling stocks, full stop.
Proven 5y ago
Meanwhile, mere days ago similar news about the Pelosis (again) loading on options before another legislative shakedown received 2 commands and was ignored (see https://news.ycombinator.com/item?id=27777562 https://news.ycombinator.com/item?id=27777562). (It's actually worse than that - several attempts to share that news were flagged by HN activists; the one above didn't) HN has become one of my favorite sites for getting a good laugh.

176 points by fooey 5y ago

It sounds like he bought MSFT stock and then sold a call option on it. Selling call options is a profit and risk reducing betting strategy where you sell rights (but not an obligation) to the buyer to call away shares at a fixed “strike” price between now and an agreed-upon expiration date in exchange for a modest fixed premium. The stock price went over the strike price before the expiration date and were called away from him. Looking at Microsoft’s price chart, over the last 5 YEARS, you would have never lost money over any 4 month period (fiscal quarter) by just simply holding MSFT shares —- and that’s before adding in the increasing quarterly dividends! Here’s an reasonable analogy for article writers that understand baseball more than options and stocks: 1) Selling call options like this Rep did is like bunting the baseball. This is where you hold the bat sideways and let the baseball tap on the bat. No chance of missing the ball but you can only get 1 base. 2) Buying and holding stock is like hitting the baseball your normal way. It’s the most common strategy. Maybe you’ll hit a home run, maybe you’ll get a few bases, maybe you’ll strike out. 3) Buying call options is like swinging for a homerun each time. You often run the risk of someone catching the ball or you miss hitting the ball but when it works, you hit it big. In terms of baseball, swinging normally/commonly is the best strategy… do you agree? Next is aiming only for home runs. Last is bunting the ball or copying what this rep does.

shdh 5y ago

Insider trading

deleted 5y ago

[deleted]

adamdusty 5y ago

The article glosses over huge details. It sounds like he bought options back in May and some time between May 26 and June 21, he used the position to sell an options contract which the buyer exercised on June 21. I'm not highly educated on the market, but it doesn't seem that unusual to me.

samspenc 5y ago
Yeah if the buyer exercised the right to buy the option, the seller has no choice, oftentimes it just "disappears" from their brokerage account and shares show up in the buyer's brokerage account. It's also possible he planned to roll the option to a future expiry date, but forgot to get around to it, resulting in the option landing ITM (In the Money) which allowed the buyer to exercise their option to buy.
- chris11 5y ago
  Details are kind of beside the point. Like you mentioned he could have had several trading strategies. He also could have changed his mind based on insider information. That's why I believe it would be much better to require politicians to file a public 10b5-1 type plan for investments.
  - AmericanChopper 5y ago
    If you had insider information that you though would adversely impact the price of a stock you’re holding, selling OTM calls against it would not be a valid way to attempt to offload your position. The thesis put forward in the article for why this is a suspect trade doesn’t make any sense, and seems to intentionally be conflating selling stock with being assigned.
- pbourke 5y ago
  The point is “don’t be fucking around with options if you’re a US Congressman trading options in a company regulated by your committee”. I favor the broader “Don’t be fucking around with derivatives or single names if you’re a US Congressperson”
hn_throwaway_99 5y ago
If you want to be a US Congressman, especially one on a cyber subcommittee, you shouldn't be trading options in individual tech stocks, period. Stick your money in an index retirement fund like the rest of the plebes.

hn8788 5y ago

Gotta love how open with their biases the article is. They make sure to spell out Republicans multiple times throughout the article, but put "D-N.J." for the Democrat from New Jersey.

AmericanChopper 5y ago
They also seem to have no idea what a covered call is, or how assignment works. Never heard of getting assigned as “dumping” a stock before. Either that, or ya know… the author is being intentionally misleading.
- MathYouF 5y ago
  One has to wonder, if demand for unbiased, non-partisan, reasonable, complete, measured, historically aware, accurate, non-inflammatory political news coverage exists, why is it only available via C-Span? Seems like the American public have either been worn down into non-engagement or radicalised, and I think it's a combination of the designs of politicians (the partisan game is simpler to play and costs less and is more predictable than the one that is focused on societal progress) and that a lot of people would rather believe that the only thing between us and a better society is the evil 50 senators in the other party. Distracts them from having to take personal responsibility for their contribution (or lack thereof) to society and that many of our problems don't have obvious legislative solutions.
  - AmericanChopper 5y ago
    I don’t think it’s much different than it’s ever been before. There’s always been efforts to control information (aka propaganda), and when people are confronted with propaganda they disagree with I think they naturally gravitate towards propaganda that they do agree with. The way this conflict escalates doesn’t typically resolve around disputed “facts” at all. I would say it typically revolves around disputes in the interpretation of facts, or the attribution of motive, or the likelihood of particular outcomes… These interpretations or opinions are naturally quite seperate from “the facts”, but the appetite for propaganda demands that each faction asserts their own interpretation as “the correct interpretation”. This article for instance doesn’t really present many disputed facts. But it does describe what it believes was the motive for a particular decision, and asserts that this explanation is clearly the correct explanation. I think this sort of thing has been around forever, and the only thing that’s different now compared to 20 years ago, is that the internet has made controlling the flow of information a slightly more efficient endeavour.

quickthrowman 5y ago

It’s his loss, MSFT is up another 10% since June 21.

busymom0 5y ago

Congress and Senate from both parties are equally corrupt when it comes to insider trading but this article makes zero mentions of Democrats. The bias in these articles is incredible. It states: > Sen. Richard Burr of North Carolina and former Sens. David Perdue and Kelly Loeffler of Georgia, all Republicans, drew scrutiny for their own pandemic trading last year as well. But it amazingly excludes Sen. Dianne Feinstein, a Democrat who did the exact same thing with covid trading. Nor does it mention Nancy Pelosi, worth $250 million, who claims she has no idea of her husband's co-incidental perfect stock trades. The article mentions Tom Malinowski but only puts "D-N.J." next to his name but puts the full "Republican" and "GOP" next to other names. Data: Unusual Stock Trading by Whales in US Congress: https://unusualwhales.com/i_am_the_senate/congress https://unusualwhales.com/i_am_the_senate/congress Unusual Stock Trading by Whales in US Senate: https://unusualwhales.com/i_am_the_senate https://unusualwhales.com/i_am_the_senate > For example, Pelosi in Dec 22 was against more stimulus. Her husband buys deep ITM TSLA and AAPL calls that day. December 23rd, she is suddenly for stimulus again, with those same companies ralling 5%, giving her an instant +30 return. > Congressman Gottheimer is absolutely an incredible options trader. He’s been selling calls at peaks on $MSFT all 2021, & seemingly buying back the contracts on dips. This in blocks of $250,000 - $5,000,000, which is incredible size given the amount of $MSFT shares he owns. For ex, on 02-12 he sold 500k $MSFT $160 strike expiring 06/18/2021. On that same day, he bought deep ITM calls of $1M-5M at $145 expiring 03/19/2021. The whale caught both of his movements as well. In congress, Democrats are worse. In the senate, Republicans are worse. Pretending that only one side does it shows the author doesn't care about the actual problem of corruption but cares about scoring political points.

zthrowaway 5y ago
Came here to post similar points. I expect nothing less from Salon…

irjustin 5y ago

I'm all for the pitch forking when it makes sense, but the congressman has a decent out which wouldn't be hard to prove. > In the audio recording, Fallon backed this up by outlining the trade as an option call in which he purchased a block of $250,000 in Microsoft shares on May 26, and subsequently sold the rights to other investors to purchase at a later date. Those other investors chose to purchase the shares on June 21, according to disclosure reports, effectively liquidating Fallon's position in the company just two weeks before the high-profile JEDI contract fell through. He purchased a bunch of stock, or ITM (in the money) options - either way he then sold covered call options (good safe bet). Those sold call options went ITM and someone exercised forcing his position to be liquidated. Purchase a stock, sell call options to make a bit more money or as a "hedge" against the stock going down. Either way, classic strategy. It didn't really work this time because the stock went up too far, out of his expectation which limits the gains to the value of the options sold. But again, it's a relatively safe strategy.

refenestrator 5y ago
If taking the job of congressperson required a blind trust, it wouldn't be an issue.
RobRivera 5y ago
100% well demonstrated. plain old covered calls selling.
foobarbazetc 5y ago
It doesn’t even matter because Congresspeople can “insider” trade like this —- it’s not illegal. I think Sen Gillibrand has a bill to address this called the STOCKS Act which she introduces every Congress but it never goes anywhere.
- nr2x 5y ago
  Exactly, insider trading for congresspeople is totally legal and utterly unethical.
- irjustin 5y ago

davidw 5y ago

People in Congress should not be buying and selling stocks, full stop.

Proven 5y ago

Meanwhile, mere days ago similar news about the Pelosis (again) loading on options before another legislative shakedown received 2 commands and was ignored (see https://news.ycombinator.com/item?id=27777562 https://news.ycombinator.com/item?id=27777562). (It's actually worse than that - several attempts to share that news were flagged by HN activists; the one above didn't) HN has become one of my favorite sites for getting a good laugh.