Stocks & Commodities V. 24:10 (57): Explore Your Options by Tom Gentile
Got a question about options? Tom Gentile is the chief options strategist at Optionetics (www.optionetics.com), an education and publishing firm dedicated to teaching investors how to minimize their risk while maximizing profits using options. To submit a question, post it to our website at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C.
ABOUT THOSE OPTIONS SCANDALS
There has been talk lately about the options scandals that have involved many big companies. I am new to options trading and was wondering how these events might affect my trading. The options backdating scandals involve a different kind of options contract
than the ones you and I trade. The controversy involves the timing of options grants from employers to employees.
Specifically, some companies are under investigation for retroactively setting the date of options to a time when the stock price was lower, which makes the option contract immediately more valuable. The scandal involves a type of option that is awarded to key
employees by the company. You and I trade a different kind of contract known as listed options. These contracts are not awarded to employees, but trade on the organized options exchanges such as the Chicago Board Options Exchange (CBOE), the International Securities Exchange (ISE), or the American Stock Exchange (AMEX). Since employee options and listed options are very different, the scandal will have no real effect on day-to-day trading for options strategists.