What's the margin on a far OTM put? Pretty minuscule coompared to the notional value of the underlying contract eh? Essentially AIG sold OTM puts for relative pennies and the payoff to the buyers were in dollars. Very leveraged stuff-no different than how most us trade every day. The difference is a futures hedge on a short ES put is a mouse click away-not quite as easy when you're caught long zillions of illiquid toxic. With MER, BSC, AIG and LEH ALL caught long who do you sell billions in securities to?
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Did AIG Insure Dodgy Mortgage Products for Goldman Sachs?
- Thread starter Greg Richards
- Start date
What's the margin on a far OTM put? Pretty minuscule coompared to the notional value of the underlying contract eh? Essentially AIG sold OTM puts for relative pennies and the payoff to the buyers were in dollars. Very leveraged stuff-no different than how most us trade every day. The difference is a futures hedge on a short ES put is a mouse click away-not quite as easy when you're caught long zillions of illiquid toxic. With MER, BSC, AIG and LEH ALL caught long who do you sell billions in securities to?
Quote from Pa(b)st Prime:
What's the margin on a far OTM put? Pretty minuscule coompared to the notional value of the underlying contract eh?
Do you know why the margin is so low? Because the chance of the far OTM put becoming deep in the money is that low.
Quite different from writing insurance on mortgages that are near guaranteed to default.
But then judging from your real estate posts from years back, it's obvious why you actually can't see that.
Quote from Pa(b)st Prime:
With MER, BSC, AIG and LEH ALL caught long who do you sell billions in securities to?
Got caught, ehh? The only thing the top executives, "traders" & directors of those firms caught were huge salaries and bonuses while their firms were actually bankrupt. And the more influential & powerful of them are now catching more of the same at the taxpayers expense. I would love to "get caught" like that.
Are you as STUPID as you appear?
When you make a trade-and it's obvious you don't-the CME is your COUNTER PARTY
The CME clearing corp acts as "the seller to every buyer and the buyer to every seller." If a MEMBER FIRM cannot make good on it's obligations then the CME has to eat the difference. Could something so calamitous occur that a few member firms go insolvant and bring the Clearing house down? Fuck yea. I suggest you read interviews with Merc Chair Leo Melamed-who I worked for-and learn how dicey the situation was for the clearing house the day after the '87 crash.
When you make a trade-and it's obvious you don't-the CME is your COUNTER PARTY
The CME clearing corp acts as "the seller to every buyer and the buyer to every seller." If a MEMBER FIRM cannot make good on it's obligations then the CME has to eat the difference. Could something so calamitous occur that a few member firms go insolvant and bring the Clearing house down? Fuck yea. I suggest you read interviews with Merc Chair Leo Melamed-who I worked for-and learn how dicey the situation was for the clearing house the day after the '87 crash.
Quote from Anaconda:
CME = exchange
AIG = counterparty
$SPX broke over 50% in a little over a year. The $VIX was 9% when $SPX was on it's highs. So don't give me the horseshit that only mortgage risk was mis-priced.
Quite a few people just on this board blew out being short exchange traded puts.....
Quite a few people just on this board blew out being short exchange traded puts.....
Quote from Anaconda:
Do you know why the margin is so low? Because the chance of the far OTM put becoming deep in the money is that low.
Quite different from writing insurance on mortgages that are near guaranteed to default.
But then judging from your real estate posts from years back, it's obvious why you actually can't see that.
Got caught, ehh? The only thing the top executives, "traders" & directors of those firms caught were huge salaries and bonuses while their firms were actually bankrupt. And the more influential & powerful of them are now catching more of the same at the taxpayers expense. I would love to "get caught" like that.
Quote from Pa(b)st Prime:
Are you as STUPID as you appear?
When you make a trade-and it's obvious you don't-the CME is your COUNTER PARTY
The CME clearing corp acts as "the seller to every buyer and the buyer to every seller." If a MEMBER FIRM cannot make good on it's obligations then the CME has to eat the difference. Could something so calamitous occur that a few member firms go insolvant and bring the Clearing house down? Fuck yea. I suggest you read interviews with Merc Chair Leo Melamed-who I worked for-and learn how dicey the situation was for the clearing house the day after the '87 crash.
I suggest you actually deal with physical deliveries on CME traded products before opening your mouth on the matter. Because you are implying that CME is the counterparty who has to deliver, when CME does not take any proprietary positions and only enforces the obligations. I also suggest you learn of the process that undergoes if a member firm fails to perform.
Quote from Pa(b)st Prime:
$SPX broke over 50% in a little over a year. The $VIX was 9% when $SPX was on it's highs. So don't give me the horseshit that only mortgage risk was mis-priced.
Quite a few people just on this board blew out being short exchange traded puts.....
Do you purposely try to be so dense?
You're trying to equate insurance with speculative market instruments.
Putting that aside, AIG wrote out insurance on mortgages that by no logic whatsoever could be serviced, let alone be repaid.
A bit different from someone writing OTM puts during a bull market that is about to crash. The exact timing is unknown to him and 99%+ of the world, otherwise, why would he do it
The only way some guy would write OTM puts while knowing the market is gonna crash in his face would be because he knew he would walk away with the gains and stick the losses on someone else. Kinda like AIG execs did.
I'm not aware of such an opportunity in the options world, are you?
I HAVE made and taken delivery of Treasuries. Have you? LMFAO-you don't have the money to take "delivery" of a mini-oats contract......
Literally around 1 out every 50,000 contracts traded at the CME result in delivery........
Literally around 1 out every 50,000 contracts traded at the CME result in delivery........
Quote from Anaconda:
I suggest you actually deal with physical deliveries on CME traded products before opening your mouth on the matter. Because you are implying that CME is the counterparty who has to deliver, when CME does not take any proprietary positions and only enforces the obligations. I also suggest you learn of the process that undergoes if a member firm fails to perform.
Quote from ElCubano:
Pabst wasnt'what goldman did akin to me setting fire to my home and then calling the insurance company to pony up on the full value when my home is now worth 50% less...
Not at all.
It would be akin to you setting your home on fire, THEN calling AIG to insure it, and signing the contract with their rep on your front lawn in front of your blazing home.
What AIG did was stupid beyond all belief. It is difficult to place blame on Goldman for taking advantage of their stupidity since, as traders and investors, we all do exactly the same thing whenever the markets give us a "mispricing" opportunity.
GS has many sins to be held accountable for, but this is not one of them.
Quote from Pa(b)st Prime:
I HAVE made and taken delivery of Treasuries. Have you? LMFAO-you don't have the money to take "delivery" of a mini-oats contract......
Literally around 1 out every 50,000 contracts traded at the CME result in delivery........
Actually I take delivery on metals, I leave the mini-oats to you. And because there is concern in the physical bullion industry over CME, I had to do my due diligence. CME is not a dealer or broker or a counterparty, it is an exchange. Something you obviously have not realized.
Don't get upset at me that you're stupid enough to equate an exchange to an insurance company that is a counterparty.
Even after the article & video posted, you cannot see the scam that the financial industry elites pulled on the people & taxpayers. It's obvious you want to be retarded, so good luck.