The article glosses over huge details. It sounds like he bought options back in May and some time between May 26 and June 21, he used the position to sell an options contract which the buyer exercised on June 21. I'm not highly educated on the market, but it doesn't seem that unusual to me.
Yeah if the buyer exercised the right to buy the option, the seller has no choice, oftentimes it just "disappears" from their brokerage account and shares show up in the buyer's brokerage account.
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.
Details are kind of beside the point. Like you mentioned he could have had several trading strategies. He also could have changed his mind based on insider information. That's why I believe it would be much better to require politicians to file a public 10b5-1 type plan for investments.
If you had insider information that you though would adversely impact the price of a stock you’re holding, selling OTM calls against it would not be a valid way to attempt to offload your position. The thesis put forward in the article for why this is a suspect trade doesn’t make any sense, and seems to intentionally be conflating selling stock with being assigned.
The point is “don’t be fucking around with options if you’re a US Congressman trading options in a company regulated by your committee”. I favor the broader “Don’t be fucking around with derivatives or single names if you’re a US Congressperson”
LOL... this is exactly how Congress and governments works for the most part, and I think it is foolish to think that it will ever change. One of the hardest things to accept is that we live in a dog eat dog world, and that by and large people will put their own interests before the interests of others. Many people actually think it is admirable that people will go to such lengths, and it is an accepted part of reality that with success often comes the apathy of others.
"No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems -- of which getting elected and re-elected are No. 1 and No. 2. Whatever is No. 3 is far behind". - Thomas Sowell
Allowing politicians to trade stock is unusual in the "weird" sense. But certainly not unusual in the "uncommon" sense, see (1) from 3 months ago.
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).
Gotta love how open with their biases the article is. They make sure to spell out Republicans multiple times throughout the article, but put "D-N.J." for the Democrat from New Jersey.
One has to wonder, if demand for unbiased, non-partisan, reasonable, complete, measured, historically aware, accurate, non-inflammatory political news coverage exists, why is it only available via C-Span?
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.
I don’t think it’s much different than it’s ever been before. There’s always been efforts to control information (aka propaganda), and when people are confronted with propaganda they disagree with I think they naturally gravitate towards propaganda that they do agree with.
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 mean, based on the timing it seems like he sold an ITM option as opposed to selling the stock for the optics. That said, he expected the option to exercise and just wanted to muddy the waters.
Based on what timing? He sold the contract the same day he purchased the stock. Even if you’re only going off the information in this article, it doesn’t seem that way at all, as they point out he “netted a healthy profit” on the sale.
I didn't get that he sold the option the same day he bought the stock from the article. Maybe I misread it. If so, than that obviously makes it not suspicious.
I read it as "he bought the stock a month ago" and then "later on, he sold an ITM option"
I agree that if the author had made any attempt at all to try and actually cover the facts, you probably wouldn’t have had that misunderstanding. If you look at this guy’s disclosure (the one linked in the article no less), it seems as though he sells a covered call on just about every allotment of stock he purchases (which is a perfectly common strategy). So it doesn’t even seem like an out of the ordinary trade for him to be making.
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?…
It also mentions David Perdue and Kelly Loeffler but doesn't mention Dianne Feinstein who did the same thing. And Pelosi from Congress who did same thing. A Ctrl+F for "Democrat" gets zero hits.
Congress and Senate from both parties are equally corrupt when it comes to insider trading but this article makes zero mentions of Democrats. The bias in these articles is incredible. It states:
> 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.
> 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.
I'm all for the pitch forking when it makes sense, but the congressman has a decent out which wouldn't be hard to prove.
> 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.
I'm so damn confused right now. Why hasn't this been used to fucking nail so many politicians!?
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...
> "The database itself is almost meaningless," says Holman. He says the only option for those who want to get a comprehensive look at what some 2,900 staffers have filed is to review the cases one by one. "And that's just too big a job for anybody to do."
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.
"No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems -- of which getting elected and re-elected are No. 1 and No. 2. Whatever is No. 3 is far behind". - Thomas Sowell
Ironically given the anti-GOP slant of the story, that amendment was introduced by.... Harry Reid. Which, of course, NPR conveniently neglected to mention, instead crediting a GOP house member for "shepherding it" (its approval was unanimous, and needed less than 30 seconds debate).
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.
It’s how democracy _should_ work. People caught with their fingers in the till are booted out of office. Instead, they have enough partisan support that it doesn’t seem to matter.
Nothing about democracy implies morality, ethics, or lack of corruption. Its only a system of electing people and as you noted if the politicians constituents dont care it doesn’t really matter what he or she does as it’s effectively a sanctioned activity.
If you want to be pedantic, then it doesn’t even imply elections. Democracy is merely the idea that the right to rule is distributed across all those who are ruled, not just some arbitrary group. Elections are a way of distributing power in this way.
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.
Is it at all possible that this kind of trading can be used to conceal "lucky outcomes" when needed and have a plausible deniability?
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?
Basically, in this case, you should look at the date that he sold the options, instead of the day of the sale. Since it was under a month of ownership, it seems suspicious to me.
Because that means that he sold it less than a month before the public announcement. Did he really not know they were thinking about it? It's a government decision, it probably took more than a month, or at least were discussing it.
I'm not sure why you would think I was referencing the "sale of stock" since my point has been the only interesting day was the "sale of option" date. That's what I'm referring to.
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).
Assuming they were standard market traded options, matching exercises with writers is done by a clearing agency, the options are fungible and you can't buy a particular person's options.
Now, you probably could write options off the market if you really wanted to, I suppose.
> 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?
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.
He isn’t required to buy/sell, but with options you only have 2 “options”: buy/sell, or let the contract expire. If the contract expires, you lose everything.
This isn’t like holding stock. It’s a price bet in the future with an expiration date.
Errr, not sure if there's a misunderstanding here.
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.
No, it’s not really possible. The trade is basically sent to the brokerage and covered by the market maker. You aren’t dealing with the pits anymore, it’s all done “blind”
I’m all for not putting pitchforks down until senior politicians either have to divest (use index funds or similar) or put their assets under neutral management.
The idea that congressmen can invest in the companies they regulate is absurd. I can’t get how there is majority support for it.
Meanwhile, mere days ago similar news about the Pelosis (again) loading on options before another legislative shakedown received 2 commands and was ignored (see https://news.ycombinator.com/item?id=27777562).
(It's actually worse than that - several attempts to share that news were flagged by HN activists; the one above didn't)
HN has become one of my favorite sites for getting a good laugh.
It sounds like he bought MSFT stock and then sold a call option on it. Selling call options is a profit and risk reducing betting strategy where you sell rights (but not an obligation) to the buyer to call away shares at a fixed “strike” price between now and an agreed-upon expiration date in exchange for a modest fixed premium. The stock price went over the strike price before the expiration date and were called away from him. Looking at Microsoft’s price chart, over the last 5 YEARS, you would have never lost money over any 4 month period (fiscal quarter) by just simply holding MSFT shares —- and that’s before adding in the increasing quarterly dividends!
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.
68 comments
[ 3.5 ms ] story [ 128 ms ] threadIt'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.
Stick your money in an index retirement fund like the rest of the plebes.
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).
(1) https://news.ycombinator.com/item?id=26821601
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?…
https://en.wikipedia.org/wiki/Salon.com#Cryptocurrency_minin...
> 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.
> 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.
I think Sen Gillibrand has a bill to address this called the STOCKS Act which she introduces every Congress but it never goes anywhere.
This specific article isn't a good example and should not be used an argument towards that end.
https://en.wikipedia.org/wiki/STOCK_Act
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...
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...
https://www.npr.org/sections/itsallpolitics/2013/04/16/17749...
Putting in laws are only as useful as them getting actually enforced.
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.
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.
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.
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?
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).
Now, you probably could write options off the market if you really wanted to, I suppose.
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?
>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.
The idea that congressmen can invest in the companies they regulate is absurd. I can’t get how there is majority support for it.
(It's actually worse than that - several attempts to share that news were flagged by HN activists; the one above didn't)
HN has become one of my favorite sites for getting a good laugh.
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.