This is what government meddling in the stock market looks like

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10 Responses to This is what government meddling in the stock market looks like

  1. Art Stone says:

    The VIX has backtracked to around 30, which probably more accurately reflects world instability at the moment. Qaddafi’s revenge is taking hold big time

  2. Parrott says:

    Heck yeah, ‘Janet’ had her FED credit card out yesterday like it was freaking QVC.

    Screw that ! I am buying ‘vintage’ CB ( silly-band) radio’s on Ebay. I am telling you , the CB was the ‘Algore amazing Internet’ of the 70’s .

    They maybe in vogue again one day , after the balloon goes up. ( and it’s close) .

    have a good one,
    Parrott

  3. briand75 says:

    Fascinating stuff. For those who might not know – VIX = volatility index. I have never dabbled in options, but I know that certain hedge funds are active in the area. We mere mortals aren’t allowed to play there as we don’t possess the $5 million buy in. In any event – as Art says – it’s too late to do anything now. Sit back and enjoy the ride.

    • Art Stone says:

      If you spin the clock back further, in 1991, I was busy designing and programming chunks of a trading system called “Project A” for the Chicago Board of Trade. While CBOT [was] primarily a futures exchange, they did dabble in options and the system had to support them.

      The thing to appreciate about options, which I alluded to, is you (the retail investor) are not the one creating options contracts. You are buying them in a pricing model few people understand, and if you sell them back (as opposed to exercising them), the price you will get is pretty arbitrary. It’s not gold coins, but it ain’t much different. You’ll never know all the ways you were taken advantage of.

      To write options contracts – and especially if you are selling uncovered options (meaning you don’t own the underlying instrument and will have to buy/sell the stock when exercised or at contract expiration means pretty much unlimited risk – you have to have very deep pockets.

  4. Art Stone says:

    To explain the graph for those who don’t read zerohedge, the VIX tracks the sentiment of the options market about future swings in stock prices – not up or down, but future movement.

    Options are sold by someone to make money by assuming the risk of future price changes. Options are priced based on “implied volatility”, meaning the probability of a significant change that puts the option “in the money” and the person buying the option “wins” the lottery”. The option seller can buy back their option and close out their position before the option acquires actual value if exercised [note that put and call options are not offsetting instruments]

    A sudden spike could indicate a change in market sentiment – but the smart people have seen China’s problems for weeks. What I see in this graph is some entity with infinitely deep pockets forcing the sellers of options to sell options well beyond the ability or desire of the option seller to take on more risk. This is the same as the LIBOR spike in September 2008. The “house” never loses, unless Trump owns the casino.

  5. CC1s121LrBGT says:

    Given that there are no laws against Congress trading on insider information, one can quickly understand why the political class is so entrenched.

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