Count 20,000 Option Contracts as Two Million Shares Under the Large Trader Rule
A trader buys 10,000 call contracts at $0.40 in the morning and sells all 10,000 at $0.55 before the close. The premium that changed hands is $400,000 on the way in and $550,000 on the way out, $950,000 in total. That is 4.75 percent of the $20 million daily dollar level in the SEC’s large trader rule. Read through the rule’s other daily measure, the same round trip is 2,000,000 shares, which is exactly the level. One day of trading sits far below the threshold and precisely on it, depending on which half of one sentence is applied. The split comes from three documents: Rule 13h-1 itself, a 2015 Commission exemptive order that changed how equity options are valued in dollars, and a footnote inside that order that left the share count where it was. The trader in the example becomes a large trader that day, and the reason sits in the footnote. This journal followed a similar unit switch when it mapped a hundred shares into a notional size bucket . One Threshold, Four Tests...