Here’s The Biggest Big Bank Mystery

Here’s The Biggest Big Bank Mystery – http://huff.to/1KWXW5V

No, the biggest mystery is how any of them that back fake options can pass any stress test.

JP Morgan once had more gold options outstanding than all the gold on earth.  If any significant fraction elect to take delivery the price would go sky high and JP would be a bug on a windshield.

Lots of banks have similar exposure, play money options that aren’t expected to be exercised but with real money consequences.

I’m surprised nobody has pounced yet, especially players in the industry gambled in. 
So lots of these banks don’t have product backing options they guarantee, I would expect somebody to deal in their own industry.

If say Exxon were to take out oil options they would have potentially a huge advantage.  First of all they would have the facillities to actually take delivery. Second, they would be in a position to intensify the squeeze and force prices higher in a way that would benefit their main business as well.

If some rule is in the way of pulling such a stunt there should be ways around it, e.g. subsidiaries. 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: