Is the game really rigged?
No, but you need to know what’s noise and what matters.
Stock Market manipulation is more like bluffing a poker hand to get your opponent to go all in.
Every morning the big brokerage firms push out to their clients a few companies stocks that they have upgraded, downgraded, reiterated coverage or changed their price target.
Many retail clients pay too much attention to these recommendations and get caught holding the bag on losing trades, because they buy into the theory that this firm upgraded shares and that it will come back.
The unfortunate thing is that those that get caught holding the bag are typically the retail crowd. They are holding the stock in their account “believing” what the firm pushed while the brokerage is likely on the other side of the trade.
Cree Inc. (NDAQ:CREE) is a perfect example of stock market manipulation after seeing a mid day upgrade a few hours before an earnings release On January 19, 2011.
Early in the morning in my live chat room I cited put option buyers come into the February $60 put strike paying $2.32 per contract. This is a directional trade that shares will move lower, which would have those puts increase in value. The next day after earnings, those same put contracts were trading at $6.90 per contract or over 200% profit.
Some could think that this was just a lucky trader, but my theory is that this was likely an “informed” trader knowing what the news was before the rest.
Here’s what I have learned over the years with the more informed wealthier bunch of traders such as hedge funds, institutions and big brokerage firms.
When they have some kind of information that is not public and they think it can move the stock, they are not going to tell the public. They are going to act on it themselves and when they do they usually go into the options market because of the leverage they get with options.
When these players come into the options market with information that they believe can move the stock, they come in large size making directional trades that will pay off big for them if they are correct.
I have studied this for many years and have witnessed this kind of blatant stock market manipulation time and time again, I developed a system on being able to pick up this kind of activity in the stock options market. The problem is that most traders do not have access to this kind of information or even aware that this even happens.
Below is a video I recorded going over exactly what exactly happened in Cree Inc (NDAQ:CREE)
What do you think? Leave your comment below.