Banking, finance, and taxes
Insider Trading Woes Come Home (GS, MS, BAC, JPM, FAZ, FAS)
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Speculation is running rampant on insider trading. This is over who is going to get caught up in the dragnet of insider trading charges rather than on which companies are soon to be acquired. The Goldman Sachs Group, Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) are pure-play investment banks and the notion that the largest round of SEC charges on insider trading is soon to be announced has many investors spooked over which firms will get caught up in the charges.
Realistically, the reports focusing on hedge funds, investment bankers, officers, and consultants could include anyone and everyone. Both Goldman Sachs and Morgan Stanley are bank holding companies like the rest of the “Too Big To Fail” institutions, yet for all practical purposes they have no real banks. That is different from the likes of a Bank of America Corporation (NYSE: BAC) and from a J.P. Morgan Chase & Co. (NYSE: JPM). Even if they are included, those still have money center banking operations.
The banks are down almost as much as the non-bank banks. The Goldman Sachs Group, Inc. (NYSE: GS) is down 3.3% at $161.20 and Morgan Stanley (NYSE: MS) is down 3.2% at $24.80. Bank of America Corporation is down 3% at $11.31 and J.P. Morgan Chase & Co. (NYSE: JPM) is down 2.1% at $38.59.
The Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) is the real tell for how the sector is doing today as the inverse triple-leverage exchange-traded product is up 3.6% at $12.21 while its opposite bullish-call counterpart in the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is down 3.5% at $22.20.
The most interesting bit here is that we do not know to what extent the ‘largest ever insider trading case’ really is as it is criminal and civil probes. We read many articles and have listened to many pundits discussing the grey-zones around what is and is not insider trading. Still, the real ‘largest ever’ is an unknown. It could be the largest number of firms, it could be on practices, and it could be many networked individuals.
If any firm on Wall Street is ever going to be given a Darth Vader image in any scandals, it seems that speculators and investors point to Goldman Sachs first before they lump others in. Goldman Sachs has had unusual options trading activity as you might suspect. Here is a table of the options trading in Goldman Sachs alone:
| WEEKCALL | Volume | Open interest |
|---|---|---|
| $160.00 | 1536 | 225 |
| $165.00 | 2795 | 707 |
| $170.00 | 2366 | 1953 |
| WEEKPUT | Volume | Open interest |
| $155.00 | 2105 | 352 |
| $160.00 | 3139 | 705 |
| DEC10CALL | Volume | Open interest |
| $160.00 | 2134 | 2286 |
| $165.00 | 4061 | 4269 |
| $170.00 | 2594 | 5488 |
| $175.00 | 2674 | 6699 |
| DEC10PUT | Volume | Open interest |
| $140.00 | 1026 | 2049 |
| $145.00 | 2743 | 1972 |
| $150.00 | 2966 | 2577 |
| $155.00 | 2605 | 4497 |
| $160.00 | 3845 | 3009 |
| $165.00 | 1498 | 2345 |
There is also a Barclays note on top of the recent deal that is soon to be reached from Ireland. It seems that there is a new wave of fears that major banks will need to raise more than $100 billion in capital. Over what time period and under what terms remains an issue up for debate.
JON C. OGG
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