Stock options manipulation
Why do a market's prices move up or down? Claims about causes are made without actual information, and accepted or dismissed based upon poor or non-existent evidence. There is a ready explanation for this price movement: Indeed, one web commentator predicted this otherwise unlikely event publicly. This explanation was subsequently dismissed by press articles that claim that stock prices end near such round numbers based upon legitimate hedging activity. But how can we know? We show that the accepted model that points to hedging as the driving cause of prices is not quantitatively consistent with the price movement on that day. Options price moved upward too quickly over a period in which the hedgers position would require selling rather than buying. Under these conditions hedgers would have driven the price away from the strike price rather than toward it. We also show that a long published theory of the role of hedging is incomplete manipulation, and that the correct theory results in much weaker price movements. This evidence substantially weakens the case of those who claim hedging as options of anomalous market price movements. Manipulation explanation that market manipulation is responsible for the final close cannot be dismissed based upon unsubstantiated, even invalid, hedging claims. Such proffered explanations shield potential illegal activity from further inquiry even though the claims behind those explanations have not been demonstrated. Is the unlikelihood of closing on such a perfectly round number suspicious? While most press reporters brushed it off as an outlier amidst normal market activity, new calculations demonstrate stock the deeper math behind the number simply does not add up. A Quantitative Analysis," Yavni Bar-Yam, Marcus de Aguiar, and Yaneer Bar-Yam investigate the very roots of why a market's prices move up and stock, along with the actions, actors, and motivations behind these changes. By carrying out sophisticated mathematical analyses, the researchers were able to disprove explanations relying on manipulation legitimate activity called hedging. January 18, was a special date for those involved in the trading manipulation options. Options are are "side-bets" on stock price movements—they are contracts that give the right to buy and sell stocks at pre-agreed prices. Market makers who sold those options in the first place stood as the ones to gain. This creates a financial incentive to manipulate prices. Options are side-bets on stock price movements — they are contracts that give the purchaser the right to buy and sell stocks at pre-assigned prices. The market makers who sold those options in the first place stood as the ones to gain from this, creating a financial incentive to manipulate stock. According to reports, the dominant market maker for AAPL options is Goldman Sachs in separate news, Goldman Sachs recently suffered losses due to erroneous options trades. How can we defeat market manipulation? The authors believe the answer lies in making the analysis of stock a matter of public options, as well as eliminating incentives and mechanisms of manipulation. The findings in this paper are an important first step in this process. A quantitative analysis Cite as: Yavni Bar-Yam, Marcus A. Download PDF also from arXiv. Abstract Why do a market's prices move up or down? Price of AAPL stock during Jan. The amount of hedging needed by straddle owners. During the closing hour, the amount of hedging needed decreases and the stock must be sold which would drive the options down, away from the strike price rather than toward it. These results are counter to the claim that hedging is responsible for the closing strike price. Fifty instances are shown. Parameters are based on AAPL stocks on January 18,and noise consistent with the average intraday volatility in January.
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