AMEX! Oh SNAP!! I would be very careful with that one thriftybob. Those specialists basically have a license to print money. It could even be one of their friends that they have doing it. It's like bungie jumping in Mexico, they just don't have the same regulations.
I've been trading the particular stock in large qtys for 15 months now, without any big trouble, so I pretty much know how the specialist will react to different order sizes.
are you interested in jollies or making money? why is it interesting if it is legal or not? if the game is up you won't be able to make money in this way.
Are these January options? If so, then it is probably a tax trade. The contra party to the options trade has taken a large short position when he sold the original puts. He probably sold the stock short to the fund that originally purchased the stock. Puts usually sell for less than calls so the contra party has a very small cost basis in their long call position. I want this side of trade! Fund has pretty much unlimited risk of loss and contra party has pretty much sweet deal - looks like this stock goes Up! Care to name the stock and the Fund? Edit - oops - this does not work since the contra party short position eliminates the gain if stock goes up.
zdreg, No offense, but did you miss the word "massive" there? Take "massive" and multiply by the 65 cents its up since then. Short interest was up again in July on low volume for the month, so it's a safe bet they haven't been able to cover, yet. You get the picture, now, right? I can make money without doing anything shady or of questionable legality because longer term, I know I'm on the right side of the trade. I'll still be interested to see if the SEC replies and how. If they say it's ok to do, I guess I've also learned a new trick to add to my toolbox.
how is the sec going to reply unless you bring it to their attention. as to "massive" it is like beauty in the eyes of the holder.
I did make a filing with the SEC enforcement folks questioning whether or not its a legal tactic. Let's put it this way. Their 425k short is large, but not massive.
What are you a "Stock Cop"? How do you benefit? Why not run ahead of it, then brag about it on here instead? I guess you are not smart or fast enough to know which side to be on when they are naked? Typical!
Firms have been investigated for less. And don't forget, options are priced so that every time you enter the market, you give up edge. Let's say the THVL of an option is 1.30. The market-maker's algorithm might price it 1.10 - 1.50. You will lose .20 in THVL as soon as you do the first leg. And you will lose .20 on the exit. These figures are minimums. Market-makers will remember large orders. When you try to unwind (or even enter with size), they will pull even these quotes after one trade, or put up smaller size. This morning I saw all 5 available option exchanges go .45 - 2.45 (from .45 - .85) because one 10 lot traded at the .85 offer.
I'm not sure if that comment was directed at me or who? I'm what you guys seem to call a position trader or investor. I do it for a living and do real well, thanks. I'm long close to 1 million shares, most of which I bought just before expiration when they were dumping like crazy, at around the strike price, pushing it to 6 or 7 cents over the strike at expiration so they'd lose their shares, and then buying again the Monday after to pick up any loose shares and rub their noses in them. At the moment I'm up an avg of 60 cents each. Please do not accuse me of not being "smart enough" or "fast enough" or having "size position" whatever that is. It should be pretty obvious that my position is way to large to try to "piggyback" on theirs without getting nailed by someone bigger, just like I nailed them. I just don't get the mentality around here. Its like everybody is a day trader trying to make a few quick cents. Why leave the big money on the table? The point was not to brag about it, but to find out if the method was legal. If its not legal, I want to use that fact to put the FEAR of GOD into those shorts. If it is legal, I might do it myself somewhere if the opportunity arose. I just thought someone here would know.