Finance, Forex and Investments

Can mutual funds sell options on their shares?

Can mutual/hedge funds sell options on their shares? If so, what stops them from selling calls on a thinly traded stock, and then making a huge purchase to send supply up, crashing the price and ensuring that the calls expire worthless? Do they have to report these options sales anywhere, like they do when they buy shares?

Public Comments

1. Hedge funds can get into the option and derivatives game since their objective is to make money anyway possible for their investors. Mutual funds are regulated by the SEC and generally can only trade stocks and a small percentage using options. Hedge funds even though they can have billions of dollars would still be vulnerable putting all their money into options since it's hard to close or sell all the positions into the market all at once. It's also easier to be on the right side of the trade then trying to manipulate the markets. The SEC does regulate hedge funds too so manipulation can be tried in the courts with penalty losing Hedge fund manager capability.
2. Some do. Very few are allowed to by their charter. NASDAQ premium income and growth symbol QQQX is one such fund.