By Saqib Iqbal Ahmed
NEW YORK (Reuters) -In the minutes before President Donald Trump’s social media post on Wednesday pausing tariffs sent the U.S. stock market rallying, some unidentified options traders placed bets worth millions of dollars that the market would rebound, data shows.
The well-timed bets likely paid off handsomely. Now, some Democratic lawmakers are calling for investigations into whether Trump’s policy reversal led to any market manipulation or insider trading.
Betting on short-term market swings is common and the trades in question could easily have been placed without any prior knowledge of the coming news as traders speculate on a market bounce or hedge against one every day.
And some market experts said a record surge in options trading volume due to the market’s wild gyrations in recent days, coupled with the fast-moving pace of market-moving news, makes it hard to put a finger on suspicious trading.
“There’s no way to know if that buyer at that moment just had lucky timing (or not),” said Henry Schwartz, vice president, market intelligence at Cboe Global Markets.
“I haven’t found any smoking gun,” he said.
Bets in options markets, where traders use equity derivatives, often appear in insider trading cases. They allow traders to bet on the direction of the market or individual stocks without having to make a large upfront commitment.
Billions of dollars change hands in the options market daily with the volume and size of trades rising in times of heightened volatility.
In an emailed statement, the White House did not directly address concerns about market manipulation. White House spokesman Kush Desai said it is the president’s responsibility to reassure the markets and Americans about economic security in the “face of nonstop media fearmongering”
The Securities and Exchange Commission, which in the past has taken action against insider trading involving options trading, declined to comment.
WELL-TIMED TRADES
Trump’s Truth Social post on Wednesday pausing tariffs on some countries came at 1:18 p.m. (1718 GMT), setting off a 9.5% jump for the S&P 500.
Market data show certain options contracts logging a spike in trading activity ahead of it.
For instance, with the S&P 500-tracking ETF SPY’s shares at around $501.50, some 5,105 SPY call options — bets that the shares would rise to finish the day above $502 — traded at around 1:00 pm ET, for an average price of $4.20, according to Trade Alert data.
When stocks soared in the afternoon the price of those calls soared as high as around $42. On paper, someone holding all 5,105 calls would have seen their value go from around $2.14 million to about $21.44 million.
Similarly, the value of other SPY calls – these betting on the ETF rising to close Wednesday above $509 – traded at around 1:10 pm ET, for an average price of $2.14. On paper, their value jumped to about $10 million by the end of the day, up from $624,000.
Reuters could not determine whether the calls were all purchased or sold by one trader or several and whether they closed the position for a gain.
SOCIAL MEDIA BUZZ
The massive swing in markets on Trump’s tariff U-turn, coming after his own social media posts in support of the U.S. market, has attracted attention online. Google searches for the term “insider trading” logged a sharp jump this week.
Before the announcement, at 9:33 a.m. (1333 GMT) Trump tried to reassure investors, posting on his Truth Social account, “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!”
Later, at 9:37 a.m. he added: “THIS IS A GREAT TIME TO BUY!!!”
U.S. House of Representatives Democratic Leader Hakeem Jeffries said there are members of Congress who will be “aggressively demanding answers and transparency particularly as it relates to stock purchase decisions that may have occurred over the last few days.”
Massive daily market swings have boosted options volume to record high – some 85 million contracts changed hands on Wednesday – making it extra hard to sift though the volume for suspicious trades.
“Bottom line, volumes and volatility were huge, so I’m unable to determine whether any of the many well-timed purchases were fortuitous normal trades or something nefarious,” said Steve Sosnick, chief strategist at Interactive Brokers.
(Reporting by Saqib Iqbal Ahmed; Additional reporting by Richard Cowan; Editing by Paritosh Bansal and Deepa Babington)
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