I'm trying to understand the concept of Pinning the Strike by Allan Ellman BS CCNY 1964-1972, DDS NYU 1968-1972. In contradistinction to the penultimate sentence below, presume the conspiracy happens. To wit, institutional investors conspire and regulators don't detect them.
For Short Calls and Puts, my loss and the MM's gain is infinite. Doubtless the MM would manipulate share prices to lower (for Short Calls) and boost (for Short Puts) share prices.
For Long Calls and Puts, isn't my option premium merely the MM's maximum profit? Then as long as share price is under (for Long Calls) and above (for Long Puts) strike price, MM will earn the option premium? So why would the MM further manipulate share price?
1. Conspiracy theory:
This theory states that market makers use their immense firepower to manipulate share price to close at the strike so as to capture maximum profit as options expire worthless. In my view, it would take an immense conspiracy by the most powerful of institutional investors to accomplish this and then go undetected by the recently improved vision of the regulators. I give little or no credence to this point of view.