Credit Default Swaps - Retail

[JSOP]

So if the strike is K, and the the stock is zero. the final payout is K-0 = infinity?

Here is the definitive answer: https://www.optionsanimal.com/what-happens-value-option-when-company-declares-bankruptcy/

So I guess the put option would just reach its maximum value which is also called its intrinsic value (K - 0) and I guess since that's the max. that anyone would get so nobody would be willing to pay for the premium over that amount to buy it so no "infinity" scenario then. Hmmn... Never thought of that.

 

[jys78]

How could a put ever go to infinity?

lol gotta be that new math!

 

[bone]

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.

Crap. This is b.s.

No, that is actually quite true. In the early 2000's I tried to get access to the Plain Vanilla Interest Rate Swaps Market on Garban, ICAP, and Prebon Yamane and I couldn't get an ISDA through one of the biggest Proprietary Trading Firms in Chicago. We could trade ICE and Clearport Energy Swaps, we could trade BrokerTec and Cantor cash Treasuries - but couldn't get close to an ISDA. Which sucked. I had a buddy who was killing it on the Northern Trust Bank Desk.

 

[Mugono]

Here is the definitive answer: https://www.optionsanimal.com/what-happens-value-option-when-company-declares-bankruptcy/

So I guess the put option would just reach its maximum value which is also called its intrinsic value (K - 0) and I guess since that's the max. that anyone would get so nobody would be willing to pay for the premium over that amount to buy it so no "infinity" scenario then. Hmmn... Never thought of that.

This is hilarious

 

[CME Observer]

This is hilarious

When you first learned to tie your shoes did someone on a message board cut you down? Props to @JSOP for coming back on the thread and closing the loop by demonstrating his newfound understanding.

 

[Sig]

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

CBOE made two attempts at something that might be accessible to retail, DOOMs and Credit Event Binary Options, but both are now defunct as far as I know. The ICE Eris credit futures are still somewhat alive.

The problem in general with exchanges that especially impacts these type of products is their "build it and they will come" mentality. They throw products at the wall in the hopes that something sticks but don't even make the most basic effort to ensure they're tradable. So they'll never show up on retail broker's platforms, never have market makers, and end up just dying even if there was a moderate interest in them if they could be bothered to put in minimal effort to support them. All to say don't hold your breath that you'll find anything you and I can access any time soon.

 

[tsznecki]

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.

You mean well I presume but you really need to stop posting about stuff you don't know.

 

[SunTrader]

Wow you have post history of almost nothing but rants. LOL

 

[JSOP]

You mean well I presume but you really need to stop posting about stuff you don't know.

I made a mistake and learned something new from it. You need to fuck off!! Putting you on "Ignore".

 

[bone]

I would suggest that if you’d like to make a play on mortgages - find a listed stock with heavy mortgage balance sheet exposure or a mortgage bond fund.

I don’t have any specific name suggestions.

Your own personal access to the Swaps market is not going to happen.