If you’re going to take a dance with the devil, you’d better understand his wily moves. “What do I mean by dancing with the devil, you ask?” The reason I consider options trading dancing with the devil is because whilst it can be lucrative, it can also be financially debilitating. 

For those who don’t know what options trading is, I’ll give you a brief explanation. If you’re interested in learning, there are many articles and videos on the topic that can be searched online. For now, please see the description below:

• An options contract is the right to buy or sell a security at a specific price by a specific date.
• A call option gives the investor the right to buy; a put option is for the right to sell.
• Options can magnify your returns, but they can also introduce additional risk and complexity to your portfolio.

It’s considered taboo to say that the stock market is manipulated. Traders and investors don’t want to believe it. They typically say, “You’re just saying that because you lost money.” In this article I’m going to take you beyond merely making a statement and give you examples, allowing you to draw your own conclusions. 

First we’ll look at General Mills, ticker symbol GIS. In December of Q4, 2023, they reported Q3 earnings. The stock was clearly oversold. My thinking was that earnings would be good for General Mills and their price would recover. Lo and behold, I was correct. GIS beat earnings expectations by 8%. However, the stock price didn’t go up. Instead, it plummeted. 

The reason the stock plummeted was because the CEO came out on the earnings call and gave weak guidance. Basically, he expected future earnings to be weaker. My b.s. meter was on high alert. I made it a point to observe the stock over the next quarter leading up to the next earnings. Q4 earnings were released on March 20th. Wouldn’t you know it, the stock again beat expectations. 

Maybe the CEO was unaware of how the company was performing. I would hope that wasn’t the case as the earnings for Q3 were reported in December, close to the end of Q4. There’s no way Jeff didn’t know that he was having another outstanding quarter, so why come out and provide weak guidance. I can’t say that it was to push down the price, but it’s suspicious at best. Many investors like myself were holding call options. expecting the price to go up.  

Why would a CEO do such a thing. Maybe he did it to help a hedge fund that stood to lose a lot of money if the stock price recovered. I really can’t speak to that. I can only speak to what happened and try to find the most logical explanation for such tomfoolery. This sort of thing happens quite often during earnings calls, leading to big questions when following quarters are much different than the CEO projected.

Moving on to Nvidia. Early last year, Nvidia soared to $480.00 on the hype of AI mania. I’ll grant, they did have great earnings, but that’s not the issue. The issue is the deceptive move to shake investors. You may recall the U.S. restricting chips from being sold to China in 2023. If not, check out the article here. Upon release of this article, Nvidia along with other chip companies plummeted. Nvidia dropped nearly $80.00 per share, surely shaking out almost every weak hand holding the stock. Looking at Nvidia’s stock price today, it’s just above $900.00 per share after a $80 pull back. 

I haven’t seen any new articles regarding chip restrictions. It was as if the restrictions no longer mattered. My question would be, “Did the news release ever matter?” Over the years, I’ve observed many articles released on what is considered a reputable media outlet, then observed the game as it played out. These articles seem designed for one purpose, to manipulate investors to buy or sell positions. 

Upgrades & Downgrades: These are two very popular tools used by BIG Money to manipulate prices up or down. This happens quite often and I’d add, too often. A perfect example from 2023 was the Tesla upgrade issued by Morgan Stanley. Tesla’s falling stock price soared from sub $200.00 to $260.00 within a few weeks, causing those holding short positions to capitulate.

Anyone with a basic understanding of economics could clearly see that Tesla was in trouble. Rising competition, price reductions and declining sales doesn’t justify an upgrade. Instead of an upgrade, they should have received a downgrade. Sure enough, their earnings release confirmed that Tesla was on a vast decline. Today, Tesla’s stock is trading around $170.00. Oh those poor shorters! They weren’t wrong in their analysis, but they were burned at the stakes nonetheless, because that’s the nature of the beast and the woes of dancing with the devil. 

I’ve given you just three examples, but there are many similar incidents taking place on a daily basis. Major indexes are sitting at all-time-highs currently. Not because of value, but because of short positioned options. The market makers sell put options, then pump the price higher, leaving those who are betting the market will drop, high and dry. It’s so blatant sometimes, one wonders how the SEC doesn’t notice it. 

My understanding is that the SEC is short staffed and therefore doesn’t have the manpower to explore such actions, actions that result in multi-billions being made or lost on a daily basis. Maybe they don’t have time, or maybe they’re enjoying the fruits of the manipulation themselves and have no motivation to do anything. I can’t speak to that as I don’t have insight into their operations. I just know that the market is riddled with unscrupulous, yet unchecked operations.

Don’t get me wrong, there’s money to be made trading in the stock market. That said, most tend to lose. It’s important to understand that there’s a bigger game happening. The better we understand the game, the better our chances of success. If we’re going to dance with the devil, it’s best to remember that it is the devil’s dance floor, and he controls the jukebox. 

Written by: 

Eric L. Lipsey | Founder | Owner 

VENTRE Capital, Inc.

www.VentreCapital.com