SIE practice questionmediumOptions Manipulation
An individual spreads false news to drive up the price of a stock, then sells call options on that stock for a profit. This is:
- APermitted for sophisticated investors
- BLegal if disclosed
- CIllegal market manipulation✓ Correct answer
- DAcceptable hedging
Explanation
Why C — Illegal market manipulation
Spreading false news to affect a security's price is illegal market manipulation and fraud. It is not permitted because an investor is sophisticated or because the person discloses the rumor, and the facts do not require insider trading.
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