This is not illegal. However, if this were an NYSE listed stock, the specialist would catch on eventually and just start filling their orders with his own inventory. The specialist can see everyones ID when they send an order and they tend to memorize the size player's IDs. Thats the beauty of having a buyer and seller of last resort, he can cut down on the bullying of the stock. If it's a NASDAQ stock, then you are screwed. This kind of bullying can go on for awhile unchecked because other market makers enjoy the increased volitility and will probably not gang up against the bully. That's why NASDAQ stocks appear to have more manipulation than NYSE stocks.
I don't see how being long makes the answers invalid. If part of the analyses suggest not being long then sell them. Being long doesn't make it harder to go short than not being long, or does it? Ursa..
Probably put this trade on as a conversion. Not too hard to get size done this way. Short 425,000 shares[/QUOTE] Now sold all long stock and is net short 125,000 shares Wait for panic and crash to end or option expiration Calls expire worthless[/QUOTE] What happens if there is no panic or crash and the short calls are in the money? Then now short 425,000 shares. Sell 3,000 Puts or put 3,000 shares Buy up to 3,000 calls for next month Sell up to 3,000 puts Cover 425,000 shares[/QUOTE] What happens if the stock spikes up and cannot cover short? Still short 425,000 shares of stock. Wait for price to get back up or expiration You get the idea. In other words postition the options, then buy or sell shares to move the stock to make the options pay. Also, Can you tell me where I can find the rules regarding this? [/QUOTE] Seems as though the fund is just trading around a position and making directional bets.
Hold on here guys, the stock in question has to do more than one million shares a day. There is no way you could push/pull the volumes you are talking about.. You have to remember shares are routinely double or even triple reported within the daily volume totals. How in the world could you buy or write 300,000 options it is impossible. No one would either buy or sell them.
This smacks of market manipulation, which is illegal. The above activities appear pretty clearly to be related to "capping and pegging" and "mini-manipulation."
i don't think it's that easy, if the trade volume of the underlying is thin, you will be get caught easily, if the trade volume is high you risk to loss both.
Freehouse correctly guessed the result. I'm a turnaround specialist that looks for things that have been overly beaten down. Sometimes the shorts get too greedy, and if they make a habit of it, people like me get our jollies out of mucking up the guaranteed trade on a massive scale. It will be interesting to see if what they were doing was legal or not.
I think zdreg pointed it out already that we're actually looking at 3000 options contracts? That's certainly possible, although depending upon the stock, that may be the entire float of options.
There are about 1 million shares worth of calls outstanding fo Aug. Keep in mind I only know how many shares the particular funds were long and how many short, at that same time. I was giving option number trades as numbers of shares at maximum, not in contracts. They don't report how many calls they'd sold or puts owned, so I was just giving maximum numbers. Since expiration the stock is up about 65 cents on fairly low volume most days.