Sure its legal, and it happens all the time. Big time shorters usually buy call before buying the stock. But remember, when they buy the calls, they force the arbs/market makers to buy stock, which causes the price to rise. The market makers don't lose money because the stock doesn't gap up, so as the stock keeps moving up, their computers keep generating buys to keep their positions covered (remember, they didn't buy 1:1). The big benefit to the call buyers is that they can pick off some covered call writers and small option writers who don't buy stock as they write the calls. Thus they probably don't buy 2000 of the same call, they probably buy 10 here, 20 there, some August, some Oct, some Jan, some LEAPs, some 40's, some 50's, some 60's, etc. That way they can pick off the maximum number of individuals. I suppose if the buy were really dramatic, the arbs/market makers could get hurt.
Now, if there was a buyout, then it would be illegal, of course, as an insider trade, even it was you that was going to make the buyout offer. But just becuase you are about to buy shares, I wouldn't think there would be any problem.
Carl |
