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.
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The manipulation of the price of a security that is underlying an option so as to influence the market value of the option. Because stock price changes often produce magnified changes in the value of options, mini manipulation, although illegal, can produce enhanced profits for the manipulators.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.