When the details of the short-selling ban began to leak out last week, options traders around the world snorted and said to themselves, “So what?” That’s because it is easy to simulate a short stock position using options. A synthetic short stock position is composed of one long ATM put option and one short ATM call option, on the the same underlying and in the same expiration cycle. It has a risk profile identical to that of being short equity…
Sunday, July 20, 2008
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The theme for July was most certainly risk management. The broad-based decline this summer has been quite breathtaking to watch, especially as all of the technical and sentiment-based indicators that we follow moved from oversold status to extremely oversold status to something like doubleplusungood. Our attitude throughout late June and early July was that the unending litany of bad news deserved to be taken seriously, and that waiting around for the “inevitable bounce” and “inevitable VIX spike” would…
Wednesday, September 24, 2008
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