Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Patrick Slevin who wrote (27634)	11/1/1997 6:27:00 PM
From: j g cordes	Read Replies (4) \| Respond to of 58727

Patrick, welcome aboard. We all pose questions and information to learn the perils of investing and trading. Thanks for your reply to the WSJ article. Your point is, if I read you correctly, that any imaginary XYZ company stands on firm ethical ground if it writes calls or puts against its own shares without giving notice to the public? Is this essentially true? Further, that if its done within the time frame of an annouced stock buyback... ".. says they will buy back 5 million dollars worth of stock. They go to Plaza and write 1000 puts, for example." Lets expand the argument to see how unethical this could become. First, when a company announces they are buying back shares, very often there is no announced floor price for purchase, no time schedule, and every excuse to not buy the shares if for example the price were to go up too much. Stock buybacks are often announced during times of stock price stress (falling), to support investor confidence... as seen this last Tuesday with IBM. Let me ask you a hypothetical question. If IBM, for example and to fictionally make a point, knew on Monday that on Tuesday they would announce a massive stock repurchase, and also observed during the 550 point selloff that the 90 November puts were very high priced... went ahead and sold puts at close Monday or on the opening downdraft Tuesday, knowing they would announce the buyback 10:AM ... is that ethical? What if they waited to be sure the options were sold first, then said go ahead and make the announcement? What if they then bought the puts back for a huge profit Wednesday with the stock over 100 knowing they would suggest let say next week, that sales are average or just barely meeting expectations because of Asia. Would this be manipulating insider knowledge to leverage quick profits that outsiders could never gain access to? As this is purely hypothetical, what are your (or anyone else's opinion)? thank you.