http://www.slate.com/blogs/breaking...s_perpetual_motion_stock_gizmo_sputters_.html "The companyâs operating loss of $4.6 million last year was partially offset by a $2.2 million gain from writing put options on its own stock. The firmâs rationale for doing this is that if the stock dips, it gets to buy equity back at a discount. And if the share price rises, it pockets the option premium. Thatâs what happened last year as the stock rose sharply - helped by about $30 million of buybacks, a substantial outlay for a firm with revenue of $110 million and a market capitalization of about $330 million. "
I used to use them but I had a problem when I ordered a new magicjack (wanted to go from magicjack to magicjack plus) I made an error when signing up and got assigned a new number when I wanted to keep my old number. They said I would have to buy another magicjack plus if I wanted my old number because apparently once you sign up, that number is forever attached to the hardware. I said forget it, demanded a refund and switched to nettalk which I have found is much better. My calls always go through now(with magicjack, if I dialed too fast, the call would not go through) Same crap happened with SIRI, I would've stayed a customer if they didnt have incompetent people working in customer service.
Many publicly traded companies do this. GOOG also does this. So does Dell. There is nothing stupid about it. It's actually pretty intelligent.
As long as they clearly identified the source of their income, I have no problem with them writing puts. It's when they give the impression that their great earnings are solely based on their product line that causes problem. A number of companies were branching out to credit card a few years ago because they thought it was easy money with the interest income. They found out otherwise.
Do whatever you want with your own shares, but using treasury funds to Texas hedge the company's shares? For example, CALL sells a bunch of puts in their passive program, but prior to the release of material non-public info which drives the stock higher. There are a million ways they can manip if allowed to do this. Unbelievable. I know that M. Dell has had a trust which amounts to a hedge fund, but I didn't know he's using DELL treasury cash to play with the stock. Would it be ok if DELL (corp) bought a shitload of puts a couple of months before a miss? I don't care who's doing it, but there is no way that should be interpreted as legal. Massive violation of fiduciary duty.
Some companies have their own in house trading floors. http://www.businessweek.com/magazine/content/10_23/b4181033582670.htm Porsche is well known for their ability to gain a nice % of income from FX trading.
On a side note: Looking out at future months open put interest looks like they're losing their butts right now. (Very little open interest is OTM ~ and there is quite a bit DITM.)
That's a treasury function; to manage flows, FX risk, income.... I'd bet anything that Porsche doesn't write puts on co-shares. Sara Lee(!) used to have a massive (for its mcap) trading desk. That's not remotely the point.