Trading in the underwriting security of an option contract in order to manipulate its price so that the options will become in-the-money.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
The act or practice of buying or selling a security underlying an option one holds in order to increase or decrease its price so that the option will be in-the-money on or before the expiration date. For example, suppose one holds a near-the-money call option on a certain number of shares of Stock A. The holder may buy Stock A in a large enough quantity to cause its price to go up. When this happens, the option becomes in-the-money, and the contract increases in value. He/she may then sell the contract at a high price and rid himself/herself of the shares previously bought. Like all forms of manipulation, mini-manipulation is illegal in most jurisdictions.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved