Market manipulation is defined as a form of fraudulent activity where there’s an effort to disrupt the free and open exchange of a market and make false, or artificial, appearances by the price of, product, service, currency, or commodity. This kind of activity can have a tremendous impact on the prices of a large variety of goods and services. In some cases it may also cause market turmoil.
Since the 1970s, the United States government has been actively trying to discourage market manipulation. The U.S. Federal Trade Commission enforces a number of anti-fraud and anti-monopoly laws designed to protect consumers and investors from market manipulation.
The federal government has passed several laws designed to discourage market manipulation on stock markets. The Securities Exchange Act of 1933 (Securities Act) prohibits companies from publicly announcing certain activities, including but not limited to share repurchases or dividends. The SEC also bars companies from giving false or misleading statements.
The law doesn’t prohibit all of these certain actions, only certain types. However, it does prohibit companies from publicly announcing that they are engaging in any of these activities. If a company publicly announces an intention to “divert” (i.e., it will distribute its current or anticipated dividend to investors in order to influence or increase the price) or “lock in” its dividends (i.e., it will do everything possible to keep the current price of a stock constant) then it is in violation of the Securities Exchange Act.
Some day traders use stock options to manipulate the price of stocks. Options are one-way transfers of a right to buy or sell a particular security. A company can issue a contract or put option, entitling itself to a particular amount of money in return for the right to purchase or sell a security at a specific price within a set period of time. A company can also issue a contract entitling itself to a particular amount of money in return for the right to sell or buy a security at a specific price within a set period of time.
Option trading is considered market manipulation if the option is issued to the option seller at a time when it is expected that the price for the option will be lower than the value of the option. If the option is issued when the underlying asset is expected to rise, then it is considered manipulation.
There are many other ways to manipulate the stock market, but none of them is as insidious or manipulative as issuing options. {or options in hopes of driving up the price of the underlying asset. If you purchase an option, you have entered into a contract with the seller. That means you have now given up your right to purchase the asset at a pre-determined price. You have no say in how the price is determined or what price you are going to purchase or sell, and no ability to control the process.
Stock market manipulation can cost you money, so it’s important to stay out of it. However, if you’ve bought an option, there’s no need to worry about market manipulation. It’s important to remember, though, that you have every right to exercise your rights under the securities act.
In a case like the one described above, a company issuing an option must first get the consent of all holders of the option before exercising the right to sell the underlying asset. After that happens, a company issuing a put option on the same stock may exercise the option if the price is below the price for the put option.
A put option is similar to a stock pick. A stock pick is a mathematical formula that can be used to determine the price that the underlying asset will eventually trade for. Put options are generally priced much higher than the cost of the underlying asset, which is why they are often used by companies with short-term plans.
If you are a stock trader who has recently purchased put options on a stock or securities, and you know that the price is about to drop, don’t hesitate to exercise your rights. {or buy more put options. {or selling your existing options. {if the price drops too low, the company issuing the put option will exercise its right to sell the underlying asset. {or the stock, you’ll be holding will fall to the price you bought. {or, if the company issuing the put option doesn’t give you the opportunity to exercise your rights, the company issuing the put option will exercise its right to sell the underlying asset. {or your stock will continue to decline. {and it’s best not to wait around for the price to go back up. {or don’t forget the stock market manipulation is illegal. You will lose money if you lose money. !
