9 ms·
"short-dated out-of-the-money call options that cash out a day after a merger/acquisition" is, like, the definition of a suspicious transaction. Somebody's gonn
by trowawee 3y ago
"short-dated out-of-the-money call options that cash out a day after a merger/acquisition" is, like, the definition of a suspicious transaction. Somebody's gonna get a knock on the door from the SEC.
- mcast 3y agoMaybe unless that person was a US senator/congressperson.
- mandevil 3y agoThis is false. Then-sitting Congressman Chris Collins (R-NY) pled guilty and was sentenced to 26 months in prison for insider-trading back in 2019-2020. He was pardoned by President Donald Trump as one of his last official acts as President, but Collins still spent 10 weeks in prison for insider-trading as a sitting congressman (this was for knowledge he gained outside of his duties as a congressman, it was knowledge he got as a member of the Board of a company). Congresspersons separately aren't allowed to trade on things they learn from their job- that was banned in 2012 under the STOCK act.
- dmoy 3y agoBanned, but not enforced, and due to the 2013 removal of electronic disclosure requirements, harder to detect? https://campaignlegal.org/update/part-2-stock-act-failed-effort-stop-insider-trading-congress https://campaignlegal.org/update/part-2-stock-act-failed-eff...
- mandevil 3y agoEh, my take is that the electronic disclosure stuff makes this more annoying for the activists- the people who are building dashboards of Congressional performance etc.- but doesn't fundamentally change the nature of the problem. The activists still build their dashboards, still comb through the documents and find things that look really bad, it's just slightly more out of date and slightly more work for them. I do think that something like the Ban Congressional Stock Trading Act (everything in a blind trust), or its even more draconian (no blind trusts, just sell!) Ban Stock Trading for Government Officials Act will probably pass, eventually. Those are general markers for where we are going. But to just say "It's not illegal if you are a Member of Congress" is flat wrong and encourages a level of cynicism that makes it harder to actually fix the problems we face today.
- tootie 3y agoAnd really, the stuff banned by the STOCK act is separate from insider trading which is why it needed a separate rule.
- dmoy 3y agoIf they obtained info about this through their role as a senator/congressperson, and not just through normal channels. If I understand it correctly: Insider trading off of classified or whatever info they get from their senate/congress job - not illegal (though imo it should be illegal). (Edit: as mandevil points out, strictly speaking illegal, but largely uneforceable/unenforced) Insider trading off of info they got from their buddy at XYZ place who knew about something ahead of time, unrelated to their senate/congress job - still illegal, same as for other people.
- bee_rider 3y agoWhy don’t people track the investments of senators and congresspeople and race to follow them? It seems like an easy way to get nearly insider trading.
- dmoy 3y agoIn 2013 the electronic disclosure part of the 2012 STOCK act was removed, so they can just disclose in some way you can't follow.
- qwytw 3y agoBecause: > Trades executed by lawmakers or their families must be disclosed within 45 days of execution Is probably an issue (it's it's actually insider trading). People do track it, though: https://www.capitoltrades.com/politicians https://www.capitoltrades.com/politicians
- jeffbee 3y agoBut lottery-ticket options trading is done all the time. The fact that the options expire the next day is part of the strategy (because before that, the options cost more). $20k might sound like a big stake but you don't know the size of the trader's portfolio, it might be 0.01% of it, and they didn't stand to lose the whole thing necessarily.
- ra7 3y agoYeah, this is not that suspicious IMO. The trade was opened yesterday when Splunk was at $119. They just needed a 7% gain by Friday to be profitable on their $127 calls. Traders make those kind of gambles all the time.
- TuringNYC 3y agoNot at this volume. Also, typically they do it for indices and typically based on some event (e.g., rate announcement), not on a heels of an unknown acquisition.
- trowawee 3y agoAll true in the abstract. But doing it the day before an acquisition is always gonna earn you a door knock, even if you're a serial gambler.