June 15, 2009
Today (6/15/09), the Dow opened down 120 points from foreign selling. The Dow then declined an additional 118 points by 11:20. The declines were attributed to option-related short selling by traders. When traders, using short selling, artificially reduce the market price of stocks they have written call options on, they reduce the value of the option and how much they will have to pay when the option is exercised or sold.
My questions for the SEC are: Is this type of short selling legal and if the up-tick rule is reinstated and the rules against naked short selling are to be enforced, does the SEC have the tools and powers to regulate foreign traders? Cliff Lindroth, San Diego, CA