For example, is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game?
Does the market absolutely prevent this kind of thing from happening? If not, could this a be way that senators (from both parties of course!) could conceal their insider trading?
This is very hard to do (read effectively impossible) as an individual person and not an institution. Trades, especially options, go through a brokerage/market maker.
As an individual, there's no way to tell your brokerage to sell "these contracts" to "this person". Which means you would have create "the sale of call option contract" as physical paper? I'm doubtful that's even possible. After you have to manually sell it. It still needs to be declared as a security transfer/sale[0]. THEN you would need to back that contract with the stocks that likely still sit inside a brokerage. The "other participant" would have to then exercise that contract which would "pull" the stock from your account to the "participant's" account.... Would this be done in a brokerage? all outside? Seems impossible as a regular person.
For institutions there is such thing as block trades that happen outside of market, but they're specifically licensed/authorized to do this.
[0] https://www.quora.com/How-can-I-sell-my-shares-to-a-particul...
The congress person wasn't holding the options contract. He sold call options to someone else. Which actually means he "owes" stock if the contract is exercised.
The congressman is betting the contract will expire worthless and make money on the premiums when he sold the call options.
Maybe I missed something?
Now, you probably could write options off the market if you really wanted to, I suppose.
>is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game?
Not for retail traders. I sell covered calls a lot and I never know who buys them.
It would be suspicious but his "alibi" is that it was part of someone exercising call options that he sold.
Assuming this is true, he actually has no control when the exercise happened, thus no control of the timing of the sale of the stock itself.
This would need to be verified via the brokerage probably through a subpoena, so it's not really a realistic investigation.
Someone else said that he sold the option the same day he bought the stock. That would clear him from any suspecion. However, that's second hand based on someone saying it was in the article and I misread it (quite possible.)
What I was claiming is that the timing makes me think he might sold the option after getting inside information, specifically so he could say "I had to sell the stock" which is a true an irrelevant fact if you sold the obligation based on that information.
Now, like I said, if he sold the option the same day he bought the stock, then he is clearly innocent. And similarly, if he sold a 1-week ITM option after getting briefed, I think he is clearly guilty (morally, if not legally).
I think Sen Gillibrand has a bill to address this called the STOCKS Act which she introduces every Congress but it never goes anywhere.
We keep hearing so many stories, I honestly believe that Gillibrand could be working on a new bill with an appended 'S'; hoping it somehow changes something.
Our political system here in the U.S.A. is kinda fubar isn't it...
https://www.npr.org/sections/itsallpolitics/2013/04/16/17749...
Putting in laws are only as useful as them getting actually enforced.
Any time you get stories like these implying that one side and only one side has corruption on it, you need to look real close because it's almost certainly a load of biased baloney.
Oh God.
I'm learning a lot about this I didn't know tonight, thanks.
Ironically, as someone who would like government to employ smarter and more successful people, I'm left wondering how much of their finances we can and should expose. But given how corrupt things seem it feels like we still need to push on this.
Now before I start trying to imagine a way two high power congress members could game the public information requirements between each other, I should go to sleep.
I'll be curious if they ever work out a definition for "benefit" here.
[0]: https://www.gillibrand.senate.gov/news/press/release/icymi-g...
This specific article isn't a good example and should not be used an argument towards that end.
But what I was getting at is that is that we shouldn’t have or even try to have rules for every single thing an elected official can or can’t do. It’s not a good way of running a system of government.
Elected officials should be accountable to their whole electorate. But instead, they are accountable only to their core constituency, everybody else be damned. And their constituency doesn’t care about effective government, only about absurd ideological issues they’ve been whipped into caring about by a collaborative media.
The idea that congressmen can invest in the companies they regulate is absurd. I can’t get how there is majority support for it.
> In the audio recording, Fallon backed this up by outlining the trade as an option call in which he purchased a block of $250,000 in Microsoft shares on May 26, and subsequently sold the rights to other investors to purchase at a later date. Those other investors chose to purchase the shares on June 21, according to disclosure reports, effectively liquidating Fallon's position in the company just two weeks before the high-profile JEDI contract fell through.
He purchased a bunch of stock, or ITM (in the money) options - either way he then sold covered call options (good safe bet). Those sold call options went ITM and someone exercised forcing his position to be liquidated.
Purchase a stock, sell call options to make a bit more money or as a "hedge" against the stock going down.
Either way, classic strategy.
It didn't really work this time because the stock went up too far, out of his expectation which limits the gains to the value of the options sold. But again, it's a relatively safe strategy.