Here's how to make a quick million. Of course, you have to be a U.S. Senator, but if you qualify, the rest is easy. Here's what you do:
On May 21, a senate subcommittee on which you serve is scheduled to grill Apple CEO Tim Cook about his Company's avoidance of income taxes. You, as a member of the subcommittee, have the opportunity to accuse Apple of shirking its moral duty to pay taxes on income derived overseas through the use of "loopholes." You will thus be able to act the patriot by beating up on "big business." Even before the hearing begins, it's clear that Apple stock is going to take a drubbing. The New York Times, in its front-page lead, headlines "BILLIONS IN TAXES AVOIDED BY APPLE, U.S. INQUIRY FINDS." Apple stock will take a drubbing. How can you translate that knowledge into profit?
Well, you could short the stock, but there's a better way to leverage a small amount of money into a huge profit. You buy puts - options to sell the stock at a higher price. It's important to cover your tracks here, so you have some relative buy them. Then, when the stock falls and the value of the puts rises, you close out your position and assume the role of a hero for having the nerve to attack a giant corporation.
In the first hour of trading on May 21, Apple stock falls 7-3/4 points. The puts soar, and you sell them at a handsome profit. As a United States senator, your conscience may not allow you to profit from the hearings. But can you say the same of all the members of your staff, your speechwriters, your researchers?
To my knowledge there has been no instance where a political leader or other government employee has been found guilty of using insider information. The Justice Department, the Food and Drug Administration, the SEC, and many other agencies employ thousands of people with privileged access to market-moving information - information on mergers or the approval or nonapproval of a drug, etc. But "insider information" cases all seem to be leveled at hedge-fund managers or other Wall Street types.
Maybe I'm being too hard of the pols. Maybe most of them are wealthy because they collected bottles and saved the deposits in a little tin box, as a song in an old musical suggested. But I wonder.
