Me Otter: No, in that case you just keep the premium. Case closed. Somebody correct me if I am wrong, but...
(1) In this example of a naked put, Li is promising to buy IMMU at $5;
(2) Only if the stock falls below $5 (minus his premium, which he just pocketed) does he lose money;
(3) But that's o.k. It's no different than buying IMMU at $5 and watching it fall;
(4) Moreover, Li now has the buying opportunity he really wanted in the first place and will most likely back up the truck.
Market makers have been notorious abusers of naked shorting. In order to eliminate this abuse, "Regulation SHO" now requires them to itemize every trade. However, on August 27 when the rest of us watched 29 million shares of IMMU cross the ticker, only 6 million were reported. Nobody seems to have a plausible explanation.
I posed the question to another board, and the only response was that (1) maybe the trades didn't occur during "trading hours", or (2) maybe the trades were "odd lots", that is, transactions of less than 100 shares, or (3) maybe a couple of huge trades were routed through the market center, but the market center didn't have to report them to a consolidated tape.
The only possibility that makes sense is #3, but that would seem to be a blatant violation of Regulation SHO. |
