64 Pages Posted: 4 Feb 2009

Date Written: February 3, 2009

Abstract

We present the evidence that the GOOGLE stock, one of the most important stocks in the 21st century, may have been illegally controlled by large Wall Street firms. We identify a group of smart traders, including financial firm proprietary traders and large traders who trade options with large orders. We find that they have advance information about the closing prices on post earning release and option expiration days. These smart traders sell options to the market which would become worthless after the key events, and their high success rate is difficult to be explained by normal trading behavior. Additional evidence from the tape, such as unusually high quoted depth and extremely low narrow quoted spreads during clustering option expiration days, provide direct proof that the GOOGLE stock price may have been manipulated to coordinate the institutional traders' option selling activities.