$600 Trillion??

Pabst · Oct 9, 2005

Quote from TheStudent:

It's a meaningless figure since it is based on $600 trillion of underlying asset value.

It has no meaning on the potential exposure of the market : If I sell puts on $1mm of IBM, I buy calls on $1mm of IBM at the same strike - we get $2mm of derivatives. But really it's the same exposure as being long only $1mm of IBM.

It also has no meaning on the market value of the traded volume. A put on ABC struck at $0.01 when ABC is trading at $100 is worth about zero, but if I buy 100 of those puts, I have traded $1mm of underlying asset value but nearly zero of market value.

Exactly. Most of these stories are written by the same reporters who had the Katrina death toll at 50,000.

traderyin · Oct 9, 2005

That could be the annual value of option traded?

marketsurfer · Oct 9, 2005

Quote from wilburbear:

Also go to the "Memory Hole" for a leaked SEC report on the U.S. option exchanges. Major bad stuff. One exchange deliberately falsified documents to the SEC to cover up its illegally activities to thwart arbitrage between the exchanges.

.

wilbur,

could you be so kind as to post a link to the leaked SEC report refered to above? i reviewed the memoryhole documents but was unable to locate.

thank you,

surfer

FXsKaLpEr · Oct 9, 2005

Quote from TheStudent:

It's a meaningless figure since it is based on $600 trillion of underlying asset value.

It has no meaning on the potential exposure of the market : If I sell puts on $1mm of IBM, I buy calls on $1mm of IBM at the same strike - we get $2mm of derivatives. But really it's the same exposure as being long only $1mm of IBM.

It also has no meaning on the market value of the traded volume. A put on ABC struck at $0.01 when ABC is trading at $100 is worth about zero, but if I buy 100 of those puts, I have traded $1mm of underlying asset value but nearly zero of market value.

whew!

... I guess that's why they call you... The Student.

now all I gotta do is learn financial Greek quantum leaping science.

FXsKaLpEr · Oct 9, 2005

Quote from MacroEvent:

yep ---- paper on top of paper written on top of paper on top of paper ----------- to almost infinity!

so you're saying that the 600t is just financial masturbation? that the hard 'underlying value' is not really that much?

It's all paper-compounded in order to get Ooos and Ahhs from doofs like me?

OneHipCat · Oct 9, 2005

Quote from FXsKaLpEr:

"US-listed" refers simply to those OTC derivatives -- various flavors of structured notes, swaps, swaptions, options, etc. -- where at least one of the counterparties is a US entity.

The number itself -- plausible enough, though I've no way of judging how accurate it is -- refers to the estimated combined value of all those OTC derivatives.

Question for you. So, what exactly are those items (derivatives) exchanged and traded OTC on this basis?

More importantly, can the market be easily tapped by retail traders? If so, how? Or, which broker(s) would typically give you access?

Are we talking stocks, futures, bonds, US gov debt, and shares or interests in just about every other monetary thing created including hybrid real estate instruments? Shares of private equity funds?

My source was an article that mentioned the 600t. I think there is more info about it here.

Overall, to me, when a market has $600T of anything 'listed' it sounds like a blast! The liquidity and volatility!!

I trade currencies in the forex, the biggest 'market' on earth (so I thought) and I WISH we had 10-times the volume and volatility we do. That is why I tuned in to the $600t.

The ForEx exchanges less than $500t "US-listed" derivatives market.

I would just like entry. I'd love to trade whatever is in it! As long as there is matching liquidity.

I'll probably get a book on it.

OTC - Over The Counter, meaning you can't trade day trade it, mate.

MacroEvent · Oct 9, 2005

Quote from FXsKaLpEr:

so you're saying that the 600t is just financial masturbation? that the hard 'underlying value' is not really that much?

It's all paper-compounded in order to get Ooos and Ahhs from doofs like me?

my point is --- WHO REALLY KNOWS THE REAL NUMBER!!!

probably no one!

what is the real value of a contract against a contract against another contract --- the only way we would ever find out is if everything collapsed. then after all the legal fights and financial wipe outs we would have some new number.

FXsKaLpEr · Oct 9, 2005

why is Warren Buffett warning about derivatives?

dgabriel · Oct 9, 2005

The 600 trillion figure was the amount traded on the CME in 2004.

It depends on how the contract is structured and how delivery is performed, either the underlying assett or cash.

You buy an option to sell a futures contract on pork bellies. That option, if exercised, has to be matched with the contract and delivery.

Most options, and probably most derivatives expire worthless.

I have a friend who trades derivatives for a bank. I'll ask him for further details.

ig0r · Oct 9, 2005

Quote from FXsKaLpEr:

why is Warren Buffett warning about derivatives?

He could be referring to the unregulated state of CDS trading between the houses