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Show-me Account Talk
- Thread starter Show-me
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hessian
Member
Show-me,
I saw in the ticker running on TV this morning (~0500) - it only said paraphrasing: [- that options trades have all but run dry, as a result the hedge funds were losing.] That's all I caught, but it sure sounded way strange!! :worried:
Can you or anyone interpret /have idea what this might mean, as consequences for Friday?, Monday?
(350z always seemed to me to also have a good undesrstanding on how these might be linked and expected consequences).
VR
I saw in the ticker running on TV this morning (~0500) - it only said paraphrasing: [- that options trades have all but run dry, as a result the hedge funds were losing.] That's all I caught, but it sure sounded way strange!! :worried:
Can you or anyone interpret /have idea what this might mean, as consequences for Friday?, Monday?
(350z always seemed to me to also have a good undesrstanding on how these might be linked and expected consequences).
VR
hessian
Member
Thanks Show-me,
Outta my league too. Maybe someone else might know the implications, and will weigh-in. I didn't even hear if it was all options, or just some subset.
I'll try to find more on subject - in meantime, maybe we'll hear from someone knowledgeable on what this is about.
VR
Outta my league too. Maybe someone else might know the implications, and will weigh-in. I didn't even hear if it was all options, or just some subset.
I'll try to find more on subject - in meantime, maybe we'll hear from someone knowledgeable on what this is about.
VR
love-to-bike
Member
I have several different trading accounts for different purposes. I took a peek at one today and was surprised that it hadn't lost as much money today as I expected given the market. Then I realized that because that account has been beaten up so much in the last year, a significant % drop doesn't mean that much actual cash lost.
Gumby
Active member
Show-me
Bought some more UYG @ $3.89 this PM.....Will it go to zero?
I thought with all the money that Paulson was throwing at the banks we would surely get a bounce. I think my other previous purchase was at $5.74. I am going to hold awhile.
phillyfed
Member
My take on that....
"Hedge fund Options have all but run dry."
They made large bets in the options market that are nearly worthless paper now. For instance, using the crash in Oil as an example. Say they thought for sure that Oil was going to keep going up and bought huge blocks of $200 a barrel Oil options that expire Dec. 2008 when Oil was rocketing upwards and pundits were telling all on CNBC that it was a shoe-in to hit $200 when it was trading at $150. Well Hedge funds may have bought those Options for $30-$40 (just guessing). Those option contracts gave them the right to trade those options in for actual shares if Oil hit the $200 level by Dec. 2008. Of course in hindsight, the chances of Oil hitting $200 by next months options expirations is nearly Nil and is probably worth .08 cents at best currently. That would be an example of a "dry option". So they effectively may have lost all of that $30-40 per contract as Oil is now trading around $50 a barrel if they are still holding those options. Even if they sold those options back, they sold them back for heavy losses as Oil went down about 70% from its highs.
That is just an example of a heavy options loss. Of course, you can use that analogy on many stocks. Especially, bank stocks.
Hedge funds have a history of leveraging their money heavily on what they perceive as winners. They are generally day-traders and momentum players that play the market up and down by shorting it. Problem is, this market has whipsawed so many by its volatility, that even Hedge fund Managers (some of the best minds) have been caught off-guard and have suffered tremendous losses for their clients.
As far as implications to the market that you ask.... Hedge fund participants are much like mutual fund holders, only the stakes are bigger and they are willing to take more risk (Beta). They also follow the markets very closely and when their hedge fund manager underperforms they often pull out their money and go to the next hot manager. The hedge fund Manager in turn has to sell stock (even if its not warranted) just to raise enough money to give the fund holder back their shares in cash redemption. That has implications on the stock market as it causes more unwarranted selling of often good stocks.
There are alot of Hedge funds that have went broke or are on the verge. They made bets on Oil, housing, auto makers, Banks & sub-prime loans packaged in high-yielding bonds.
Hope this helped.
Rod
Well-known member
Who knows?
I'd like to think so, but I don't trust it.
One thing's for sure, volume was large.
:blink::notrust::worried:
Birchtree
Well-known member
"Further declines in stock prices simply increase the long-term returns that investors can expect over time. It is important to establish exposure slowly, but long-term investors who ignore attractive valuations are not investors at all. The main damage that investors can do to their financial security at this point would come from selling into steep but impermanent declines. Stocks are a claim to a very long term stream of future cash flows, so ignore the paralyzing fear now."
http://savehaven.com/article-11861.htm
http://savehaven.com/article-11861.htm
wv-girl
Member
Rod
Well-known member
Rod
Well-known member
Birchtree
Well-known member
That's what makes the stock market such a great arena to do investing battle. You as an individual have equal opportunity to either make or give back money. Know your emotional proclivities foremost and you'll do fine. This market is actually titillating because I know how much further ahead my portfolio will be in three years. I'll be reinvesting many dividends every month next year all the way up for the next eight thousand points.
wv-girl
Member
Gotta love your unwavering faith.
Birchtree
Well-known member
I've been hammered down like a fine piece of silver or flat like a nickle that has been on the tracks - but I'm after value and this market is way undervalued. Siegel thinks fair value on the SPX is at 1380. I haven't sold a single stock since the July 15th low and have bought 322 individual positions and now each one is causing a certain degree of pain but it will eventually be worth the pain and agony.
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