Companies that buy their own options?

[Naked shorts]

To help ensure a public company remains a solvent and hedge the risk of the economy going to sh*t, why don't they buy way-out-of-the-money puts in their own stock to give lenders more confidence in the business?

Is this a common practice? If not, why not?

p.s. one would assume that smart lenders would do this anyway.

 

[skyQuake]

Re: Company that buy their own options?

To help ensure a public company remains a solvent and hedge the risk of the economy going to sh*t, why don't they buy way-out-of-the-money puts in their own stock to give lenders more confidence in the business?

Is this a common practice? If not, why not?

p.s. one would assume that smart lenders would do this anyway.

I dont think a company buying puts in their own stock would do much for investor/lender confidence!
Also the company has to be large enough to have a liquid ETO market esp for out of the money puts. Getting size done in those would be an issue too i guess

 

[Naked shorts]

Re: Company that buy their own options?

I dont think a company buying puts in their own stock would do much for investor/lender confidence!
Also the company has to be large enough to have a liquid ETO market esp for out of the money puts. Getting size done in those would be an issue too i guess

Good points, but surely now after the gfc, lenders should be aware that companies can easily fail through no fault of their own. It seems a very prudent hedging strategy to ensure the longevity of any business.

 

[nunthewiser]

nice to see ya back mr shorts, hope all is well in funkyville

 

[Naked shorts]

nice to see ya back mr shorts, hope all is well in funkyville

thanks nun, all is good

 

[Tysonboss1]

I think it would be a silly Idea,

I would be pretty upset if I found out the management of a company I owned were wasting time playing options in their own stock. Time and money would be much better spent focusing on operations.

I don't think managements attention should be at all concerned with the share market let alone the options market.