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| *Ostroff, Fair and Company>>>Investing |
Does options trading affect a company's business? |
I trade options and was wondering if by trading them I can harm or help companies like when we buy or sell their stocks. If you are trading options based on insider information (as that term is defined by the Securities and Exchange Commiussion) you can do yourself and the company a lot of harm and spend time sitting in a jail cell. Otherwise, options are just agreements between private individuals and they have no direct bearing on a company's business or finances. Options are valued according to the stock price, and the stock itself is nothing more than what the market believes the company is worth based on future prospects. Thus said, stocks are NOT businesses themselves, and always innaccurate (if they were accurate, no one would ever make money because we could never find stocks at a discount!). options are a form of Derivitives... meaning their price is derived from something other than themselves (in this case it comes from the common stock)... so if an option move the common stock price it is similar to the tail wagging the dog.. but that doesnt stop it from happening ... a month ago Citigroup's common stock jumped higher mid day due to unusually high call options activity...... so even though its not supposed to happen it occasionally (rarely) does. |
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