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Politics : Idea Of The Day
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To: IQBAL LATIF who wrote (18751)6/30/1998 11:10:00 AM
From: Chuck Molinary  Read Replies (1) of 50167
 
Question to thread: Potential trading strategy?

The company that I work for and many other companies offer stock purchase plans whereby an employee can apportion a certain amount of salary towards purchase of the company's stock. Typically, these plans run on a semi-annual basis, e.g., contributions from January through June are converted to shares on June 30. Most plans that I know of will set the purchase price of shares at 15% below the January 1 or June 30 price, whichever is lower.

Many employees will immediately cash out of their stock as soon as it is acquired thereby capturing the 15+% premium.

My question is can these employee sales provide sufficient downward pressure on a stock to drive down the price a few ticks? If so, it would seem that a short position established prior to the exercise date could be covered for a quick profit.

Anyone have comments on this? What am I missing?

Thanks,
ctm
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