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Tony.London Suburbs

By Tony.London Suburbs
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Redone

Redone

Posted
Posted

Why isn't anyone asking why Robert Peston broke the news 4 hours before it became acknowledged by the banks. That is market abuse. How much earlier did the people that told Peston know? Who else did they tell? How much trading did they do?

The SEC aanounced short selling restrictions that came into effect yesterday. The difference to the FSA is that the SEC rules focussed on the market abuse aspects of short selling and protected buyers of securities. So of course the FSA had to follow, sheep as they are.

the institutions that lend the stock are also the biggest investors - the ones that your pension moneys go into, that support your endowments, that support your unit trusts and ETFs. There have been a number of academic stucies that have supported the value of short selling as beneficial to the markets. Today on Radio 4 the head of Standard Life investments said that he is happy the restrictions are temporary. Why do you trust these people to invest for your future, but at the same time question them when they decide that the revenue they get from lending is more beneficial than the potential impact from short selling. Pick a position and stick with it!

Jeremy

Jeremy

Posted
Posted

AcedOut Wrote:

-------------------------------------------------------

> If you write a put option, you're net long the

> underlying (long delta). Yes, you can sell short

> to hedge (reduce your delta), but you can also

> write calls. In understand what you're saying,

> but the number of short positions must be limited

> somehow.


No no no, if you sell a call and a put, you are essentially short on a straddle - so you start taking a loss as soon as the spot moves in either direction! The whole point of hedging by shorting the stock is that you can dynamically change the quantity of the hedge as the delta changes.


Anyway, enough of this...




>

> Regulation of over-inflated prices? Surely an

> over-inflated stock would cause an investor to

> sell hence driving down the price? I'm not sure I

> follow that reasoning.

mockney piers

mockney piers

Posted
Posted

Just to translate:


A call is the right to buy a commodity or instrument (gold or a share) at a price in the future

A put is the right to sell.


It's done to mitigate risk obviously and can be a genuinely useful thing.


Of course people then trade these things.


The deltas discussed are the change in the value of the derivative (derived instrument such as a call or put) as a result of a change to the spot (cash value if sold now) of the underlying (the gold or the share that the the derivative gives you the right to buy/sell).


To hedge is another risk mitigation that's something akin to betting on the horses in a race such that you'll end up exactly where you started regardless of the result, except that you think one of the horses has better odds than it should, and you hope that one wins, but no bother if it doesn't...very roughly.


Just thought I'd demystify the garbled nonsense above for anyone interested.


It does get a whole load more complicated than that obviously but then that's what gives rise to lots of clever structured instruments that compleeeeetley mitigate the risk that comes with selling expensive mortgages to poor people, honest guv ;)

AcedOut

AcedOut

Posted
Posted
Jeremy - you are right, but if you trade at different strikes, it's possible to stay hedged within the given range of strikes and receive a premium to boot. My option theory is rusty at best, but looks like the FSA has done as I thought now anyway, banning short selling of select banking stocks.
????

????

Posted
Posted

To put hedging into context, it's like you've got a potential rendezvous with an absolute hotty at work but you tell the not so hotty certainty from your local that you'll probably be in later..... about 10ish....


...this may explain the regular late attendees at EDF drinks..........

jumpinjackflash

jumpinjackflash

Posted
Posted

Huguenot Wrote:

-------------------------------------------------------

> I can't quite work out what you're saying there

> Redone

>

> It seems to be that everything is bad - but what

> would your recommendation be? Are you saying put

> the money under the mattress?


according to one trader on LBC last night, we should stop buying banking stocks and start putting all our money into fine wine and art! Right then, I'm off to the cash point. Will stop off at Oddbins before going to see a bloke about a pickled cow...

Redone

Redone

Posted
Posted

Huguenot Wrote:

-------------------------------------------------------

> I can't quite work out what you're saying there

> Redone

>

> It seems to be that everything is bad - but what

> would your recommendation be? Are you saying put

> the money under the mattress?



My point is that over time it comes down to the quality of the individual stocks and that the short sellers can at best only have a temporary impact by themselves. Did they help drive down HBOS - yes. But the main sellers of HBOS shares are the institutions that decided that their business was too concentrated in one business line and they were too dependent for funding on the market. Compare the price movements with HSBC from June of last year. The general move against banks hit them both, but in the final analysis, the market has voted HSBC as the better candidate. Did traders short HSBC - yes, but in the end the fundamentals have stood up better and that is the indication of fair value.

EDOldie

EDOldie

Posted
Posted

???? Wrote:

-------------------------------------------------------

> To put hedging into context, it's like you've got

> a potential rendezvous with an absolute hotty at

> work but you tell the not so hotty certainty from

> your local that you'll probably be in later.....

> about 10ish....


Good shout.

giggirl

giggirl

Posted
Posted

Apparently....


If you had purchased ?1000 of Northern Rock shares one year ago it would now


be worth ?4.95, with HBOS, earlier last week your ?1000 would have been worth


?16.50, ?1000 invested in XL Leisure would now be worth less than ?5, but if


you bought ?1000 worth of Tennents Lager one year ago, drank it all, then took


the empty cans to an aluminium re-cycling plant, you would get ?214. So based


on the above statistics the best current investment advice is to drink heavily


and re-cycle!!!

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