Certainly Patrick, Nothing taken personally, especially on a topic like this... however we do appear to have a difference of opinion...
Regretfully I still don't have any clear idea from you on where you feel corporations should (if at all...) draw the line on using their inside knowledge to trade their shares and use derivatives in the market. Maybe they should trade all the derivatives they can... If XYZ company executive bought heavy puts or calls prior to earnings it would be investigated as insider activity. What's the difference if the company does it?
I'm of the opinion that free markets optimally exist to serve the broadest number of investors, not to serve the interests of corporations... even though select investors benefit through ownership of stocks which are played this way. Its not a strong enough rationalization to me.
When any cog in the universe of market participants is allowed to or takes advantage of unethical opportunities it hurts all participants in the end... because the markets' long term success relies on the greatest number of particpants having a fair chance and an equal opportunity to trade based on public information.
If you read through many of the SI threads, there's a constant hum of supposed insider facts and rumor, a constant hum of those trying to verify or support a cause for a large volume of calls or puts. Most people here, and even more in the general public of fund and stock owners, don't realize that companies trade derivatives in their own stock. I can say with certainty that most anyone would feel very lucky to know what positions in puts and calls a company is taking on its own stock. Hey, if Andy Grove says he's betting 35000 Dec calls, I'm on his side. I just think its fair that he makes it public knowledge when he does it so that we know it isn't AMD making a desperate bet.
Regarding stock buybacks.. its a relative calculation of what's the best use of cash; to put capital to work in future products and employment of people, or to buy back shares boosting the per share price by having fewer on the market. Is that really a managment vote of confidence or a vote of worry? Sometimes shares do get so cheap that buying them back is prudent or can save on debt service, but most of the time I would prefer to see cash invested to top line growth.
> It is to the stockholders advantage that the company earns money writing puts...it is further to the holder's advantage that the company does not overpay for the stock. <
If the stock is too expensive they shouldn't buy it anyway, most stock buybacks are discretionary.
> I would not sell a put on a broken down Edsel in this market. <
Nor would I <gg>..
..good luck with your investments.
Jim |
