4 ms·

> But why are they then legal to sell? Things are legal until there is a law or ruling that makes them illegal

by X6S1x6Okd1st 3y ago

matsemann 3y ago
It just feels like a casino, where if you win you get sent to jail. No risk for the house. No upside for the gambler.
- matteotom 3y ago
  Not necessarily - if you're a hedge fund and you think you have an algorithm that can predict gains just a tiny bit better than the call option's seller, then 99 times out of 100 you lose $x but that last 1 in 100 you might gain $x*150, and on average make money.
- jjav 3y ago
  Well no, because there is nothing illegal about the trade itself nor the profit. What's illegal is to use insider info to make the decision to do the trade. Did the entity making this trade use insider info? We don't know. If they did not, nothing wrong with the trade. Now, the circumstances are such that this reeks of insider info. Nobody sane would have done that trade otherwise. So hopefully the SEC will investigate fully. If it turns out the trader really did not have any connection to either of these companies and had no knowledge of the acquisition and simply made the luckiest bet of their life.. then that's fine.
  - matsemann 3y ago
    > Nobody sane would have done that trade otherwise. But my point is that there were people on the other side more than willing to take that person's money. If "no one sane" would do that trade, why let the other side be able to profit of it until suddenly it wasn't free money? Why shouldn't the other side carry any risk?
    - jjav 3y ago
      > But my point is that there were people on the other side more than willing to take that person's money. What else would you propose? Designing an algorithm that prevents people from offering or taking bad trades would require a reliable crystal ball. Solving the halting problem sounds easier.

4 ms·

> But why are they then legal to sell? Things are legal until there is a law or ruling that makes them illegal

by X6S1x6Okd1st 3y ago

> But why are they then legal to sell? Things are legal until there is a law or ruling that makes them illegal

matsemann 3y ago
It just feels like a casino, where if you win you get sent to jail. No risk for the house. No upside for the gambler.
- matteotom 3y ago
  Not necessarily - if you're a hedge fund and you think you have an algorithm that can predict gains just a tiny bit better than the call option's seller, then 99 times out of 100 you lose $x but that last 1 in 100 you might gain $x*150, and on average make money.
- jjav 3y ago
  Well no, because there is nothing illegal about the trade itself nor the profit. What's illegal is to use insider info to make the decision to do the trade. Did the entity making this trade use insider info? We don't know. If they did not, nothing wrong with the trade. Now, the circumstances are such that this reeks of insider info. Nobody sane would have done that trade otherwise. So hopefully the SEC will investigate fully. If it turns out the trader really did not have any connection to either of these companies and had no knowledge of the acquisition and simply made the luckiest bet of their life.. then that's fine.
  - matsemann 3y ago
    > Nobody sane would have done that trade otherwise. But my point is that there were people on the other side more than willing to take that person's money. If "no one sane" would do that trade, why let the other side be able to profit of it until suddenly it wasn't free money? Why shouldn't the other side carry any risk?
    - jjav 3y ago
      > But my point is that there were people on the other side more than willing to take that person's money. What else would you propose? Designing an algorithm that prevents people from offering or taking bad trades would require a reliable crystal ball. Solving the halting problem sounds easier.