Credit Default Swaps - Retail

kmiklas

kmiklas

Howdy.

Any retail brokers offer CDS?

(NYSE:GE, I'm looking in your direction)

I'm with IB, and checked with them, but sadly, the answer is no.

I doubt that eTrade, Ameritrade, Scottrade, et alia would offer them, but I'd happily be proven wrong.

By the way, what happens to a Put option if a company declares Chapter 11?

Thanks,
Keith
 
It would have to be exchange-listed for those mentioned to offer it. It's OTC and you'll need to get your ISDA, which you can't.
 
kmiklas said:
By the way, what happens to a Put option if a company declares Chapter 11?

Thanks,
Keith
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A put option maximum profit is the strike price if the stock goes to zero minus premium paid. If a company declares Chapter anything the options still trade and have value (puts mostly) and can be traded but perhaps not exercised.
 
SunTrader said:
Typically $10 mill is minimum size and probably figure to put up $2.5 mill up front. Got that?
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Hmmm.... let's make a deal. I'll sell you a junk bond with a 12% annual coupon for that 10M, with an added clause to pay another 20% when GE goes into bankruptcy. :)
destriero said:
It would have to be exchange-listed for those mentioned to offer it. It's OTC and you'll need to get your ISDA, which you can't.
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Crap. This is b.s.
 
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kmiklas said:
By the way, what happens to a Put option if a company declares Chapter 11?

Thanks,
Keith
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Theoretically, its price should go into infinity. But in reality, I think it just won't be available for trading anymore as the company is no longer existing so its options shouldn't be existing either. The counterparty risk would be way too much. I am not exactly sure of the actual process, tbh.
 
JSOP said:
Theoretically, its price should go into infinity. But in reality, I think it just won't be available for trading anymore as the company is no longer existing so its options shouldn't be existing either. The counterparty risk would be way too much. I am not exactly sure of the actual process, tbh.
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How could a put ever go to infinity?
 
newwurldmn said:
How could a put ever go to infinity?
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because the price of the underlying, one of the inputs in the pricing equation for a put is 0. If the price of a put is inversely related to the price of the underlying, then if the price of the underlying goes to 0, then the price of the put goes to infinity???!! I said, theoretically.
 
JSOP said:
because the price of the underlying, one of the inputs in the pricing equation for a put is 0. If the price of a put is inversely related to the price of the underlying, then if the price of the underlying goes to 0, then the price of the put goes to infinity???!! I said, theoretically.
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So if the strike is K, and the the stock is zero. the final payout is K-0 = infinity?
 
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