On April 10, 2023, a pivotal moment unfolded in the financial markets as President Donald Trump made a significant social media announcement. Just moments before his post about pausing tariffs was published, some options traders placed substantial bets—worth millions of dollars—that the U.S. stock market would rebound. This well-timed trading activity led to a notable rally in the stock market, raising questions about potential market manipulation or insider trading.
The immediate aftermath of Trump's announcement has prompted a response from some Democratic lawmakers, who are now calling for investigations into whether the President's policy reversal influenced any suspicious market activity. These lawmakers are particularly interested in understanding if the trades executed prior to the announcement were based on privileged information. It is essential to note that betting on short-term market fluctuations is commonplace, and many traders engage in such activities without prior knowledge of impending news.
Market experts suggest that the recent surge in options trading volume—driven by the stock market's erratic movements—complicates the task of identifying potentially suspicious trading behavior. According to Henry Schwartz, vice president of market intelligence at Cboe Global Markets, it is challenging to ascertain whether traders simply had exceptional timing or were acting on insider information. “I haven't found any smoking gun,” Schwartz remarked, highlighting the difficulty of uncovering illicit activity in the current market environment.
Options markets, which allow traders to use equity derivatives to speculate on market movements without significant upfront investments, see billions in transactions daily. The size and frequency of trades often escalate during periods of heightened volatility, as witnessed recently.
In response to inquiries regarding allegations of market manipulation, the White House refrained from providing specific answers. White House spokesman Kush Desai emphasized that it is the president's duty to reassure both the markets and the American public about economic stability, particularly in light of persistent negative media narratives. Meanwhile, the Securities and Exchange Commission (SEC)—which has previously acted against insider trading—declined to comment on the recent developments.
The timing of Trump's post on his Truth Social account, which took place at 1:18 p.m. (1718 GMT), coincided with a 9.5% surge in the S&P 500. Data indicates that certain options contracts experienced a spike in trading activity just before the announcement. For example, at around 1:00 p.m. ET, 5,105 SPY call options—bets that shares would rise above $502—were traded at approximately $4.20 each. Following the stock market's surge, the value of these calls skyrocketed, potentially increasing from roughly $2.14 million to an astonishing $21.44 million.
Similarly, another set of SPY calls—betting on the ETF closing above $509—traded around 1:10 p.m. ET for an average price of $2.14, which could have risen to nearly $10 million by the day's end. However, it remains unclear whether these trades were executed by a single trader or multiple participants, and whether any positions were closed for profit.
The dramatic market shifts following Trump's tariff announcement have not gone unnoticed online. Google searches for the term insider trading saw a significant increase this week. Earlier in the day, at 9:33 a.m. (1333 GMT), Trump attempted to allay investor fears with a post stating, “BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” Shortly thereafter, he encouraged buyers, stating, “THIS IS A GREAT TIME TO BUY!!!”
Democratic Leader of the U.S. House of Representatives, Hakeem Jeffries, has indicated that some members of Congress will be vigorously seeking answers and transparency regarding stock purchase decisions made in recent days. The volatility in the markets has resulted in record high options trading volume, with approximately 85 million contracts exchanged on Wednesday alone. This surge in activity makes it increasingly challenging to discern whether well-timed purchases were simply the result of luck or indicative of more dubious trading practices.
In conclusion, the recent events surrounding Trump's tariff announcement and the subsequent stock market rally raise significant questions about the integrity of trading practices in the current volatile environment. As investigations potentially unfold, the intersection of politics and finance continues to capture public attention.
