4 ms·

Is it at all possible that this kind of trading can be used to conceal "lucky outcomes" when needed and have a plausible deniability? For example, is there no

by xrd 5y ago

Is it at all possible that this kind of trading can be used to conceal "lucky outcomes" when needed and have a plausible deniability? For example, is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game? Does the market absolutely prevent this kind of thing from happening? If not, could this a be way that senators (from both parties of course!) could conceal their insider trading?

fnordfnordfnord 5y ago
You'd have to have the insider information far in advance. >is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game? Not for retail traders. I sell covered calls a lot and I never know who buys them.
- quickthrowman 5y ago
  Citadel or another MM is almost always the other party in an options trade
  - fnordfnordfnord 5y ago
    Yup, that's my understanding as well.
HWR_14 5y ago
Basically, in this case, you should look at the date that he sold the options, instead of the day of the sale. Since it was under a month of ownership, it seems suspicious to me.
- irjustin 5y ago
  Why does that seem suspicious?
  - HWR_14 5y ago
    Because that means that he sold it less than a month before the public announcement. Did he really not know they were thinking about it? It's a government decision, it probably took more than a month, or at least were discussing it.
    - irjustin 5y ago
      I'm assuming your reference of "it" is the "sale of the stock" instead of the "sale of the options contract". It would be suspicious but his "alibi" is that it was part of someone exercising call options that he sold. Assuming this is true, he actually has no control when the exercise happened, thus no control of the timing of the sale of the stock itself. This would need to be verified via the brokerage probably through a subpoena, so it's not really a realistic investigation.
      - HWR_14 5y ago
        I'm not sure why you would think I was referencing the "sale of stock" since my point has been the only interesting day was the "sale of option" date. That's what I'm referring to. Someone else said that he sold the option the same day he bought the stock. That would clear him from any suspecion. However, that's second hand based on someone saying it was in the article and I misread it (quite possible.) What I was claiming is that the timing makes me think he might sold the option after getting inside information, specifically so he could say "I had to sell the stock" which is a true an irrelevant fact if you sold the obligation based on that information. Now, like I said, if he sold the option the same day he bought the stock, then he is clearly innocent. And similarly, if he sold a 1-week ITM option after getting briefed, I think he is clearly guilty (morally, if not legally).
        irjustin 5y ago
        Ah sorry that's my bad on the wrong assumption.
toast0 5y ago
Assuming they were standard market traded options, matching exercises with writers is done by a clearing agency, the options are fungible and you can't buy a particular person's options. Now, you probably could write options off the market if you really wanted to, I suppose.
irjustin 5y ago
> For example, is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game? This is very hard to do (read effectively impossible) as an individual person and not an institution. Trades, especially options, go through a brokerage/market maker. As an individual, there's no way to tell your brokerage to sell "these contracts" to "this person". Which means you would have create "the sale of call option contract" as physical paper? I'm doubtful that's even possible. After you have to manually sell it. It still needs to be declared as a security transfer/sale[0]. THEN you would need to back that contract with the stocks that likely still sit inside a brokerage. The "other participant" would have to then exercise that contract which would "pull" the stock from your account to the "participant's" account.... Would this be done in a brokerage? all outside? Seems impossible as a regular person. For institutions there is such thing as block trades that happen outside of market, but they're specifically licensed/authorized to do this. [0] https://www.quora.com/How-can-I-sell-my-shares-to-a-particular-person https://www.quora.com/How-can-I-sell-my-shares-to-a-particul...
- codeddesign 5y ago
  He isn’t required to buy/sell, but with options you only have 2 “options”: buy/sell, or let the contract expire. If the contract expires, you lose everything. This isn’t like holding stock. It’s a price bet in the future with an expiration date.
  - irjustin 5y ago
    Errr, not sure if there's a misunderstanding here. The congress person wasn't holding the options contract. He sold call options to someone else. Which actually means he "owes" stock if the contract is exercised. The congressman is betting the contract will expire worthless and make money on the premiums when he sold the call options. Maybe I missed something?
codeddesign 5y ago
No, it’s not really possible. The trade is basically sent to the brokerage and covered by the market maker. You aren’t dealing with the pits anymore, it’s all done “blind”

by xrd 5y ago

fnordfnordfnord 5y ago

You'd have to have the insider information far in advance. >is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game? Not for retail traders. I sell covered calls a lot and I never know who buys them.

quickthrowman 5y ago
Citadel or another MM is almost always the other party in an options trade
- fnordfnordfnord 5y ago
  Yup, that's my understanding as well.

HWR_14 5y ago

Basically, in this case, you should look at the date that he sold the options, instead of the day of the sale. Since it was under a month of ownership, it seems suspicious to me.

irjustin 5y ago
Why does that seem suspicious?
- HWR_14 5y ago
  Because that means that he sold it less than a month before the public announcement. Did he really not know they were thinking about it? It's a government decision, it probably took more than a month, or at least were discussing it.
  - irjustin 5y ago
    I'm assuming your reference of "it" is the "sale of the stock" instead of the "sale of the options contract". It would be suspicious but his "alibi" is that it was part of someone exercising call options that he sold. Assuming this is true, he actually has no control when the exercise happened, thus no control of the timing of the sale of the stock itself. This would need to be verified via the brokerage probably through a subpoena, so it's not really a realistic investigation.
    - HWR_14 5y ago
      I'm not sure why you would think I was referencing the "sale of stock" since my point has been the only interesting day was the "sale of option" date. That's what I'm referring to. Someone else said that he sold the option the same day he bought the stock. That would clear him from any suspecion. However, that's second hand based on someone saying it was in the article and I misread it (quite possible.) What I was claiming is that the timing makes me think he might sold the option after getting inside information, specifically so he could say "I had to sell the stock" which is a true an irrelevant fact if you sold the obligation based on that information. Now, like I said, if he sold the option the same day he bought the stock, then he is clearly innocent. And similarly, if he sold a 1-week ITM option after getting briefed, I think he is clearly guilty (morally, if not legally).
      - irjustin 5y ago
        Ah sorry that's my bad on the wrong assumption.

toast0 5y ago

Assuming they were standard market traded options, matching exercises with writers is done by a clearing agency, the options are fungible and you can't buy a particular person's options. Now, you probably could write options off the market if you really wanted to, I suppose.

irjustin 5y ago

> For example, is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game? This is very hard to do (read effectively impossible) as an individual person and not an institution. Trades, especially options, go through a brokerage/market maker. As an individual, there's no way to tell your brokerage to sell "these contracts" to "this person". Which means you would have create "the sale of call option contract" as physical paper? I'm doubtful that's even possible. After you have to manually sell it. It still needs to be declared as a security transfer/sale[0]. THEN you would need to back that contract with the stocks that likely still sit inside a brokerage. The "other participant" would have to then exercise that contract which would "pull" the stock from your account to the "participant's" account.... Would this be done in a brokerage? all outside? Seems impossible as a regular person. For institutions there is such thing as block trades that happen outside of market, but they're specifically licensed/authorized to do this. [0] https://www.quora.com/How-can-I-sell-my-shares-to-a-particular-person https://www.quora.com/How-can-I-sell-my-shares-to-a-particul...

codeddesign 5y ago
He isn’t required to buy/sell, but with options you only have 2 “options”: buy/sell, or let the contract expire. If the contract expires, you lose everything. This isn’t like holding stock. It’s a price bet in the future with an expiration date.
- irjustin 5y ago
  Errr, not sure if there's a misunderstanding here. The congress person wasn't holding the options contract. He sold call options to someone else. Which actually means he "owes" stock if the contract is exercised. The congressman is betting the contract will expire worthless and make money on the premiums when he sold the call options. Maybe I missed something?

codeddesign 5y ago

No, it’s not really possible. The trade is basically sent to the brokerage and covered by the market maker. You aren’t dealing with the pits anymore, it’s all done “blind”