This is sort of a follow-up question from: A few questions about stock investing
After reading Baerker's answer, an interesting thought came to mind. Can a market manipulator exploit the settlement period difference between stocks and options to cheat the market during a stock split?
Let's say a bad guy named Bob, does the following:
(1) Company A announces a stock split, and the ex date is on Day 2.
(2) On Day 1, Bob puts a sell order for 100 shares of stock A at $100. He does not own the underlying stock, however (not yet). Alice buys the 100 shares from Bob. Bob is supposed to deliver the shares T+2 days later, which is on Day 3.
(3) On Day 2, the stock splits 1:2. The price reduces to $50 as a result. Bob buys a call option which enables him to buy 100 shares of the post-split stock A at $50 each. He executes it immediately. As the settlement date for an option is T+1, Bob is supposed to receive the shares on Day 3.
(4) On Day 3, Bob receives the 100 shares ($50 each) from the call option he bought. He then immediately delivers these 100 shares to Alice, who pays him $100 per share. Bob pockets an ($100-$50)*100 profit - essentially doubling his money.
What stops a malicious market manipulator like Bob to cheat the markets like this?
