GOP Rep. on cyber committee dumped MSFT shortly before $10B contract scrapped
salon.com
salon.com
> In the audio recording, Fallon backed this up by outlining the trade as an option call in which he purchased a block of $250,000 in Microsoft shares on May 26, and subsequently sold the rights to other investors to purchase at a later date. Those other investors chose to purchase the shares on June 21, according to disclosure reports, effectively liquidating Fallon's position in the company just two weeks before the high-profile JEDI contract fell through.
He purchased a bunch of stock, or ITM (in the money) options - either way he then sold covered call options (good safe bet). Those sold call options went ITM and someone exercised forcing his position to be liquidated.
Purchase a stock, sell call options to make a bit more money or as a "hedge" against the stock going down.
Either way, classic strategy.
It didn't really work this time because the stock went up too far, out of his expectation which limits the gains to the value of the options sold. But again, it's a relatively safe strategy.
For example, is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game?
Does the market absolutely prevent this kind of thing from happening? If not, could this a be way that senators (from both parties of course!) could conceal their insider trading?
This is very hard to do (read effectively impossible) as an individual person and not an institution. Trades, especially options, go through a brokerage/market maker.
As an individual, there's no way to tell your brokerage to sell "these contracts" to "this person". Which means you would have create "the sale of call option contract" as physical paper? I'm doubtful that's even possible. After you have to manually sell it. It still needs to be declared as a security transfer/sale[0]. THEN you would need to back that contract with the stocks that likely still sit inside a brokerage. The "other participant" would have to then exercise that contract which would "pull" the stock from your account to the "participant's" account.... Would this be done in a brokerage? all outside? Seems impossible as a regular person.
For institutions there is such thing as block trades that happen outside of market, but they're specifically licensed/authorized to do this.
[0] https://www.quora.com/How-can-I-sell-my-shares-to-a-particul...
The congress person wasn't holding the options contract. He sold call options to someone else. Which actually means he "owes" stock if the contract is exercised.
The congressman is betting the contract will expire worthless and make money on the premiums when he sold the call options.
Maybe I missed something?
Now, you probably could write options off the market if you really wanted to, I suppose.
>is there no way that the call options could be purchased on the other side by a friendly party that is a participant in the game?
Not for retail traders. I sell covered calls a lot and I never know who buys them.
It would be suspicious but his "alibi" is that it was part of someone exercising call options that he sold.
Assuming this is true, he actually has no control when the exercise happened, thus no control of the timing of the sale of the stock itself.
This would need to be verified via the brokerage probably through a subpoena, so it's not really a realistic investigation.
Someone else said that he sold the option the same day he bought the stock. That would clear him from any suspecion. However, that's second hand based on someone saying it was in the article and I misread it (quite possible.)
What I was claiming is that the timing makes me think he might sold the option after getting inside information, specifically so he could say "I had to sell the stock" which is a true an irrelevant fact if you sold the obligation based on that information.
Now, like I said, if he sold the option the same day he bought the stock, then he is clearly innocent. And similarly, if he sold a 1-week ITM option after getting briefed, I think he is clearly guilty (morally, if not legally).
I think Sen Gillibrand has a bill to address this called the STOCKS Act which she introduces every Congress but it never goes anywhere.
We keep hearing so many stories, I honestly believe that Gillibrand could be working on a new bill with an appended 'S'; hoping it somehow changes something.
Our political system here in the U.S.A. is kinda fubar isn't it...
https://www.npr.org/sections/itsallpolitics/2013/04/16/17749...
Putting in laws are only as useful as them getting actually enforced.
Any time you get stories like these implying that one side and only one side has corruption on it, you need to look real close because it's almost certainly a load of biased baloney.
Oh God.
I'm learning a lot about this I didn't know tonight, thanks.
Ironically, as someone who would like government to employ smarter and more successful people, I'm left wondering how much of their finances we can and should expose. But given how corrupt things seem it feels like we still need to push on this.
Now before I start trying to imagine a way two high power congress members could game the public information requirements between each other, I should go to sleep.
I'll be curious if they ever work out a definition for "benefit" here.
[0]: https://www.gillibrand.senate.gov/news/press/release/icymi-g...
This specific article isn't a good example and should not be used an argument towards that end.
But what I was getting at is that is that we shouldn’t have or even try to have rules for every single thing an elected official can or can’t do. It’s not a good way of running a system of government.
Elected officials should be accountable to their whole electorate. But instead, they are accountable only to their core constituency, everybody else be damned. And their constituency doesn’t care about effective government, only about absurd ideological issues they’ve been whipped into caring about by a collaborative media.
The idea that congressmen can invest in the companies they regulate is absurd. I can’t get how there is majority support for it.
Stick your money in an index retirement fund like the rest of the plebes.
It's also possible he planned to roll the option to a future expiry date, but forgot to get around to it, resulting in the option landing ITM (In the Money) which allowed the buyer to exercise their option to buy.
Insider trading laws are awful, specifically because they only restrict a specific group of people with "insider" knowledge from trading. Removing information removes efficiency (especially when you selectively pick who can act on the information).
https://en.wikipedia.org/wiki/Salon.com#Cryptocurrency_minin...
Either that, or ya know… the author is being intentionally misleading.
Seems like the American public have either been worn down into non-engagement or radicalised, and I think it's a combination of the designs of politicians (the partisan game is simpler to play and costs less and is more predictable than the one that is focused on societal progress) and that a lot of people would rather believe that the only thing between us and a better society is the evil 50 senators in the other party. Distracts them from having to take personal responsibility for their contribution (or lack thereof) to society and that many of our problems don't have obvious legislative solutions.
The way this conflict escalates doesn’t typically resolve around disputed “facts” at all. I would say it typically revolves around disputes in the interpretation of facts, or the attribution of motive, or the likelihood of particular outcomes… These interpretations or opinions are naturally quite seperate from “the facts”, but the appetite for propaganda demands that each faction asserts their own interpretation as “the correct interpretation”.
This article for instance doesn’t really present many disputed facts. But it does describe what it believes was the motive for a particular decision, and asserts that this explanation is clearly the correct explanation.
I think this sort of thing has been around forever, and the only thing that’s different now compared to 20 years ago, is that the internet has made controlling the flow of information a slightly more efficient endeavour.
I read it as "he bought the stock a month ago" and then "later on, he sold an ITM option"
I don’t agree that the article implies in any way that he was selling ITM calls to try and exit a position though. But it does seem to imply that he had control over when the contract was exercised, and that he may not have even had a contractual obligation to sell the stock, which is very obviously complete nonsense. So who knows what the article was trying to say, apart from maybe GOP man bad?…
Here’s an reasonable analogy for article writers that understand baseball more than options and stocks:
1) Selling call options like this Rep did is like bunting the baseball. This is where you hold the bat sideways and let the baseball tap on the bat. No chance of missing the ball but you can only get 1 base.
2) Buying and holding stock is like hitting the baseball your normal way. It’s the most common strategy. Maybe you’ll hit a home run, maybe you’ll get a few bases, maybe you’ll strike out.
3) Buying call options is like swinging for a homerun each time. You often run the risk of someone catching the ball or you miss hitting the ball but when it works, you hit it big.
In terms of baseball, swinging normally/commonly is the best strategy… do you agree? Next is aiming only for home runs. Last is bunting the ball or copying what this rep does.
> Sen. Richard Burr of North Carolina and former Sens. David Perdue and Kelly Loeffler of Georgia, all Republicans, drew scrutiny for their own pandemic trading last year as well.
But it amazingly excludes Sen. Dianne Feinstein, a Democrat who did the exact same thing with covid trading. Nor does it mention Nancy Pelosi, worth $250 million, who claims she has no idea of her husband's co-incidental perfect stock trades. The article mentions Tom Malinowski but only puts "D-N.J." next to his name but puts the full "Republican" and "GOP" next to other names.
Data:
Unusual Stock Trading by Whales in US Congress:
https://unusualwhales.com/i_am_the_senate/congress
Unusual Stock Trading by Whales in US Senate:
https://unusualwhales.com/i_am_the_senate
> For example, Pelosi in Dec 22 was against more stimulus. Her husband buys deep ITM TSLA and AAPL calls that day. December 23rd, she is suddenly for stimulus again, with those same companies ralling 5%, giving her an instant +30 return.
> Congressman Gottheimer is absolutely an incredible options trader. He’s been selling calls at peaks on $MSFT all 2021, & seemingly buying back the contracts on dips. This in blocks of $250,000 - $5,000,000, which is incredible size given the amount of $MSFT shares he owns. For ex, on 02-12 he sold 500k $MSFT $160 strike expiring 06/18/2021. On that same day, he bought deep ITM calls of $1M-5M at $145 expiring 03/19/2021. The whale caught both of his movements as well.
In congress, Democrats are worse. In the senate, Republicans are worse. Pretending that only one side does it shows the author doesn't care about the actual problem of corruption but cares about scoring political points.