John O

Rolling Stone's Taibbi on Naked Short Sales: Close but No Cigar

I was an options market maker on the PSE for 5 years and the CBOE for 5 years and traded options and stocks short and long in about every conceivable situation. I am intimately familiar with the Bear Stearns take down.
I will say that the author here and Taibbi and others who believe that naked short sellers caused the Bear Stearns crash do not have a clue to what has happened or they are deliberately misdirecting the blame away from people like Dimon, Bernanke, Cox, Cramer, and many others who stole billions from illegal insider trading.

Just ask Cui Bono? and the answer becomes the illegal inside traders and J.P. Morgan.

See the real explanation of Bear Stearns below:

www.optionsforemployee...

Goldman Sachs, J.P. Morgan: Who Got the Better Deal on TARP Warrants?

I think the warrants were sold in a manner which was set up to give the Treasury as little as possible and that is what happened. Who were the beneficiaries? Probably J.P.Morgan Co and others who bought the warrants, whether they hedged or not. Had the warrants been sold on a gradual basis over, time the implied vol would have approached what it was three months prior. I think the actual volatility of the stock will be reduced over the next year or so because of the sale. But after that anything goes and we may see the price at 15 or 100.

Recommendation: Buy the warrants and short the stock 300/200.

JAO

Rolling Stone's Taibbi on Naked Short Sales: Close but No Cigar

I am trying to find someone who will take a pot at explaining how so called "naked short sales", 90% of which occurred after the collapse of Bear Stearns and after the collapse of Lehman, caused the collapse of those two towers, faster than Larry Silverstein can say "pull it."

Options Trader Friday Outlook: EU GDP Disappoints

Dear Phillip:

Have you ever been an options market maker on an options exchange?
Have you ever managed options portfolios?
Have you ever trained market makers who became millionaires?
Have you ever personally made substantial sums of money using the strategies you promote?
What is the largest position you personally have ever held in puts and calls?

John Olagues

The SEC’s Terrorism Tool Comes Under Fire

Your article is disguised cheap propoganda for the real terrorists.

"you all are either againts the terrist or you are with 'em" GWB

Short Interest Hits New Record High On NYSE

Bernie Shaeffer's in the business of marketing for mass consumption. He never made a nickle trading Stock and certainly never had to be right in an options position.

Piedra is correct

John

Congress to Close Stock Option Expense Tax Loophole?

Mr. Blodget, I am sorry to say does not understand nor does Senator Levine and his staff what the situation truely is.

1. When the options are exercised, the company writes off for tax prposes the intrinsic value (i.e. the difference between the exercise price and the stock's market price on the day of exercise).

2. When the options are exercised, the employee gets a current liability for the same amount that the company writes off. So the tax collector collects approximately the same from the employee as the company gets a credit.

3. The net income to the tax collector is the same as if the company paid $100,000 in cash as a salary to the employee.

4. If the Congress changes the tax collection method to tax the theoretical value of Black Scholes at grant day (appropriately discounted for the options being ESOs rather than listed calls), there would be no gain to the tax collector because the income to the employee would be the same as the deduction to the company. Therefore no gain to the tax collector.

5. The fact that the amount written off by companies for tax during the period of 2002-2007 is seven times as great as the expense against earnings during that period was expected, although the re-statement of earnings due to admitted backdating has perhaps changed that ratio. It was expected because effectively no deductions against earnings were required by FASB and the SEC prior to 2006.

6. If and when the congress wished to close the gap between expenses reported against earnings and expenses reported for tax purposes, there is an easy method.
Congress chose to use theoretical pricing models to value employee options at grant day as an expense against earnings, perhaps as a result of lobbying by accountants and optons plan designers and mathematicians who wanted to increase their revenues .

It certainly has not clarified matters. All one has to do is look at Google's 10-K and see if anyone can determine what was the company's compensation expense for the past three years. Its impossible by analysing the reported data.

Senator Levine has gathered together the same gang of tired advisors from the SEC or formerly from the SEC and executives from companies to investigate the tax gap. He will get nowhere.

John Olagues

Why Did Google Invest in Sergey Brin's Wife's Biotech Start-Up?

Accurate statement ,Sol.

Take a good look at Google's 10K year ending Dec 2006, page 91, and you will see that over 100% of Google's earnings have been paid to employees, officers and directors.

The investors are merely riding a chain letter.

John Olagues

Early Exercises of ESOs Worse than Early Withdrawal from 401 K Plan

Patrick:

Thanks for your comment

I will try to address the issues you raised.

1. The initial Minimum Margin Requirement for selling (writing) 10 "naked" listed calls

with an exercise price of 520 expiring in Jan 2009 was, prior to April of this year, 10%

of the value of the stock at 470 (i.e. $47,000.00). Ten calls of course gives the buyer

the right to buy 1000 shares. The Market price of the options was about $66,000 for

the 10 calls.

So if you had no Google stock you would have had to put up $47,000.

The recent rules changes make the minimum initial requirement about $40,000.

If you owned 100 shares fully paid for in the account, there may be only

$10,000 of margin requirement.

Of course if the 401 k plan was self directed, the employee could merely sell the calls

here and pledge enough of the assets to cover the margin. He should sell perhaps

five or six calls because of special tax treatments of gains in a 401 K plan.

2. Buying puts can be usefull at times, but we generally think selling calls is better.

3. If the holder is a director or officer, he can hedge with no problem as long as he

complies with SEC Rule 10b-5 and Rule 16c-4 and Section 16b of the 1934 Act, which

is quite easy to comply with if he has good advisors.

We always maintain a long delta position so if there is a large up move requiring an

ajustment for margin purposes, it comes after the value of the combined positions

has increased.

The idea is to avoid costly premature exercises, reduce risk and delay taxes. The

same principles apply to considerations of removing money from a retirement plan.

John

Yahoo Shareholders, Here's Your Opportunity To Act

Goog work Eric:

If you get to ask a question, ask Semel when he is going to return the $50,000,000 million he owes the company as a result of the March 10, 2004 backdated spring loaded grant of 2,900,000 options.

Executive Options Abuses Say Short Sell Yahoo

Cross Profit:

Yes, I should have waited ; but no reader could have acted before todays move. My fundamental view is the same.

Looks like Semel will have a big day. Touche.

Cheers:

John Olagues

Google: Extraordinary Growth, But The Stock's Still Expensive

Henry:

Google estimated that the "Fair Value" of the expense of employee and executive stock options to be $621,000,000 for the year 2007. This is prior to their introduction of the new transferable options program for 6.6 million options. The additioal expense for the transferable feature is estimated by Google to be $90,000,000 for the first quarter of 2007 and another $160,000,000 for granted options vesting after the first quarter of 2007.

These figures do not include the "Fair Value" expenses of future granted options which will include expenses associated with the grant of higher valued options.

As I am sure you know, the "Fair Value" that is expensed wil be far less in the case of Google than their actual options expense, given the dramatic increase in the stock's value.

What is your view of how all of these new options expenses will impact earnings and the market value of the stock?

Johnny Options

What is the Basis of Yahoo CEO Terry Semel's Bonus?

Sramana Mitra.

I am a bit puzzled by your article on Terry Semel. His bonus that you mentioned had a theoretical value (i.e. Fair Value) of about $10,000,000 and perhaps less according the accuracy of certain assumptions.

Semel was granted options that had theoretical value of $110,000,000 as a bonus when he joined in April 2001.

He receive one batch of 6 million options on May 31, 2006 whose theoretical value was over $60,000,000.

On March 10, 2004, Semel was granted options to buy 2,900,000 shares of pre-split stock at $41.70 ( five cents above the low closing price for 2004 and prior to the biggest 30 day run up in 6 years). In other words it was back-dated and spring-loaded.

Go to Wikipoadia to see for yourself or review his Form4's.

Please tell the real story on Semel. He is probably laughing at you and others who are concentrating on this relative insignificant grant.

For some real facts and articles on ESOs go to optionsforemployees.co...

Apple, Dreamworks, Yahoo!: Do $1 a Year CEOs Really Boost Stock Value?

Dear Dave:

Terry Semel did better than you suggest.

He pocketed $450,000,000 net from exercises of options and sales of stock.

He still holds about $300,000,000 -320,000,000 in fair value of un-exercised options wih the stock at 29.45.

Some of those options were backdated and spring loaded. Most of he costs to Yahoo were not recorded against earnings.

If you want the details of his options grants you can go to optonsforemployees.com....

John

Closer Look at Gooptions: More PR Than HR

This is the best article I've read on the Google TSOs.
There is an easier way for Google to accomplish its objective with less cost and hassel.
I'll explain it to anyone who cares to email me.