The New York herald., 1922-02-28

doubtedly, there will be people who
will take shot at it-lots Of them
The usual offer made in get rich
quick letters of this character is to
sell call option on subscription is
sue of stock which is all but worth
less. The letter would state, say, that
the stock now is worth ST. a share
An option on so or 100 shares for a
sixty day period will be offered for the
small sum of So or 81. the assurance
being given by tie broker" that, in
his belief the stock will go to 81 or S.
share within the life Of the option.
There is nothing untrue abou. the
statements in such a letter. 1t sets
forth plainly that tie prospect is Of
fered "a chance" to make several
thousand dollars on an investment Of
sS or s4. If the prospect buys the
option that is exactly what he has
bought--a chance.
Way smoothed for Plunge.
But it is not the So or 81 involved
in the purchase Of the option that the
broker" is fishing for. He Is using
that only as a means of getting his
sucker interested for heavier plunge.
The broker" has given 1t as Lis opin-
ion that the stock will go up to three
or four times the figure mentioned in
the option. and has obligated himself
to sell at the option figure, regardless
of the price.
1t is not only the opinion of the
broker" that the stock is going up
He knows it. For he already has the
wash sales crew in action. AS soon
as the options being to sell well, the
business of fake sales circulating
among three or four manipulators be-
gins, and straightway the price begins
to mount. Tie effect of this is 20
make the person who has bough. the
option exercise it quickly.
Likewise, it gives the ''broker" an
opportunity to advance the optional
price in the next series of option offers
which is forthcoming Immediately. A
continued increase in the price of the
stock through wash sales justifies the
increased option figure, and more
suckers are hooked for bigger money
Already. to all appearances, the
broker" has made good his prediction
that the price of the stock would rise
and the purchaser apparently has
made money. just as the broker" had
promised. The broker" having known
previously just what was going to
happen, Of course, was perfectly safe
in Offering to refund the purchase
price of the option If the stock did not
reach the figure he predicted. The
purchase price Of the option. there
fore, is velvet" for the broker"
stock Unloaded at Top.
But does the investor really make
the huge profits that were promised
Certainly not. The whole idea of the
game is to make the stock appear to
be jumping in value in order to unload
as much as possible Of it at the high
est possible price. The low price in
the option is used as an opening
wedge.
Then as soon as the stock is un-
loaded on the public the process OF
wash sales stops as dead as Hectors
pup, and you couldn't find a bidder for
the stock with fine tooth comb. The
price fzzles out to next to nothing,
and all the astute persons who ac-
quired shares Of it through the shrewd
purchase of options are left with moth
ing to show for their money except a
lot Of nice engraved paper Just about
worth its weight as junk.
Yet, as a usual thing. there is no
recourse for the victim. The promoter
OF such n game usually Is experienced
and slick enough not to have made a
single promise that he could not and
does not fulfill. In short, he executes
his contract to the letter. the only
fault being that the purchaser of the
stock did not force a sale of his pur-
chases before the wind went out Of the
wash sales. And. even at that. the
chances are that his broker" already
had way figured out whereby he
could sidestep taking back any of the
stock.