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The FCMs are intermediaries in all dealings between an account holder and the clearing house. Delivery into a futures contract is just another such transaction, so it's perfectly understandable.

1. Whether one receives credit or pays when doing a 1x2 depends on the strikes (hence I dislike the whole "credit/debit" terminology). And no, forget covered calls. As to there being no downside, you're wrong. Just plot a payoff diagram and you will see. 2. Like I said previously, if their...

Yeah, so maybe the bet wasn't totally stupid, after all... Obviously, it's impossible to know what the process for these guys is like, so it's all just educated guessing at best. Moreover, I am reasonably certain, based on what I've heard in the mkt, that the culprit was a very large 1 x 3...

Interesting stuff... What's your target vol/return?

While it's impossible to know what these guys were thinking, the theory here is actually quite simple... There are all sorts of reasons to utilize these types of strategies, some kinda valid and some monumentally stupid. It appears that these guys were motivated by the latter. I'd be happy to...

Very well... I urge you to consider that, apart from the claim you made in the title of the thread, you also have said a variety of other things. I felt compelled to respond to some of those statements. I am sorry that this resulted in the discussion developing in a way that you disliked. If...

Right, so there is a whole lot going on here... I will most definitely respond tomorrow.

Right, so does that mean you are seeking to qualify your original broad statement? And I didn't prove anything, but then I wasn't trying to. I was simply trying to respond to some particular statements you have made.

I have no idea why you would say such a thing? Have you actually looked at what happened in these specific cases? I will give you a particular example of Iceland, since you asked so nicely. Rough drawdown during 2008 crisis: 10y govt bond (Rikisbref) 12% OMX Iceland All-Share Index 94% Rough...

It's not magic, as I have said a number of times. I take your analysis seriously and decided to examine whether it holds up, since your conclusion would be curious, if true. So, for myself, I looked at the recent cases of distress (Iceland, Greece, Venezuela, just to name a few) to examine...

I have made a suggestion... It's quite easy to do the basic examination along the lines I have proposed. I was curious whether you have the will necessary to look at cases that could invalidate your claim. I am kinda surprised that you didn't even ask what cases I was specifically referring...

Like I said, why do you have to rely on "gut feel"? You can easily examine a variety of precedent of various recency.

Who says? Govt bonds are backed by many things, including the central bank's gold reserves, the power of the govt to tax economic activity going fwd, military power, ect etc etc.

This is a fallacy, IMHO... You cannot argue about long-term "resilience" of stocks without performing an identical analysis for bonds and just relying on very long-term "smoothed" returns. If you want to argue in terms of resilience, you would have to examine periods of large drawdown and how...

I am not disagreeing with the idea that sovereign bonds can lose money. Obviously, there are risks associated with bonds, as any asset allocation study will be able to tell you. My disagreement is simply with the idea that, in a scenario where you incur large losses in your local ccy govt bond...

Not this again... You know what the solution is? Central banking according to the tenets of proper, full on Sharia law, with its prohibition on riba, will ensure that your central bank will stop being an engine of inflation.

Very well... I would suggest to you that you might want to test those statements above which could be classified as hypotheses using the available cases. I have looked at a few and I would have to disagree with at least some of your claims above.

Well, yeah, that's kinda my point... You can't arithmetically lose 100%, unless it's a hard default (which isn't very likely with a sovereign). I am just curious why you think that bonds are significantly different in terms of the risk of extreme drawdown to, say, stocks. Based on all the...

It's common sense, really... Moreover, it's very engine-dependant, so there are no rules. People start by asking the same questions as you and then experiment with viable solutions.

Assuming it's a local ccy bond, how are you going to lose 100%, whether in real or nominal terms?