Buy Options, Feed Story to Wall Street Journal, Make Fortune, Rinse and Repeat

Buy Options, Feed Story to Wall Street Journal, Make Fortune, Rinse and Repeat

The hedge fund model can be a great model. Many titans in New York have made fortunes trading on other people’s money and some have even done so legally.

Yet, the reality that is exposed in the Showtime show Billions is that a tremendous amount of hedge fund activity is out and out illegal.

But, nothing is more blatantly illegal than buying options on a stock such as, say, Boston Scientific, on a Friday and then feeding a story made of whole cloth to the Wall Street Journal that another company such as, say, Stryker, is about to make an acquisition. The story is then published on Monday, causing the target’s (or fake target’s) stock to rise and the supposed acquiror’s to fall.

Yet, while all eyes were turned towards Singapore over the weekend, this is precisely what happened. And, it is now Wednesday and Stryker has denied ever having any interest in Boston Scientific, causing the stock prices to return to their earlier levels, while the hedge fund instigator behind all this has clearly made a fortune. Along the way, there are plenty of other people here, including folks like Jon and Pete Najarian, who look for unusual options activity and tag along with their daddy’s money, who could have also made money here (and committed no crime). There are losers as well.

In this age of Trump, where illusions and fake stories become a smokescreen for reality behind which even our most powerful are consolidating their fortunes, it is easy to just dismiss this, and to say it is all a game. But, to do that undermines confidence in our markets and will ultimately lead to a deterioration of our economic fundamentals. It defies the U.S. foundations as law-based and makes us look more and more like Russia.

The bottom line is that whoever fed this story to Peter Loftus, Dana Mattioli, Ben Dummett and Dana Cimilluca at The Wall Street Journal needs to go to jail. This isn’t about reversing the manifest unfairness of their actions as it is about savings and preserving our economic system and legal principles.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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