SIE practice questionhardOptions - Insider Trading
An options trader receives material, non-public information about an upcoming FDA drug approval and purchases call options. Later, the trader sells the options after the news is released. Which statements are true?
- AThe trader has violated margin requirements only
- BThe purchase is legal since options are not equities
- CThe sale is illegal, but the purchase is not
- DThe trader has violated insider trading laws by acting on non-public information✓ Correct answer
Explanation
Why D — The trader has violated insider trading laws by acting on non-public information
Insider trading laws apply to all securities, including options. Acting on material, non-public info is illegal regardless of the instrument. The violation occurs with the initial trade; margin is unrelated.
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