WoW !! VIX Index at 16 exactly for one day

The market saw one of the worst sell-offs of 2012 yesterday. As we mentioned in our previous video, the VIX had fallen to about 17 by Wednesday, just at Ben Bernanke delivered the FOMC meeting press conference. (If you bought a Long Straddle at this level of the VIX, you did great – please see our previous video blog). Sure enough, the Fed didn’t give the market the fix it wanted – and coupled with some bad economic data on Thursday, the markets fell off a cliff. Adding to the woes, 16 global banks were downgraded by Moody’s, including the largest U.S. banks.

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The VIX index post-Greek elections

The Vix or the “Fear” Index dropped over 10% today. Of course, this is not surprising given that the much-watched Greek elections over the weekend were what the markets wanted. The markets did indeed dodge a bullet ! However, all is not well with Spain’s 10-year bonds spiking to over 7.1% today, and that has the European and U.S. markets worried. We are entering a low-VIX environment and this can produce a few great strategies over the next 6 to 12 weeks. In this video, we discuss some of these Options strategies.

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The value of my Ivy League MBA degree just went to “zero”

Okay, so I don’t mean that literally. But the point is – MBA graduates spend an enormous amount of time studying theories of classical finance, the behavior of financial markets and precise methods of valuation of companies. We pore through complicated financial statements, calculate the weighted average cost of capital to the second decimal place, plot Beta correlations on complex spreadsheets, and like magicians, can come up with detailed cash flow statements of a company for the next 5 years. How pompous is that – but I digress. Now why do we do all this – supposedly to find the fair value of what that stock should be worth. We convince ourselves (and others, unfortunately) that taking such a rigorous approach to analysis cannot result in anything but the precise values for the market, stock or company.

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Something Different

A slight departure from the regular stuff we write about – not that there’s nothing interesting to write about in the world of markets, in fact there’s a lot going on. But as we try to launch optiontiger.com, I’ve personally been bogged down with all the details that go into making a great site up and running as well as dealing with all the online marketing challenges, social media, SEO, and a gazillion other things (literally !). Its overwhelming, to say the least, but exciting nonetheless.

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Whales in London ???

Didn’t realize that the Thames in London could hold whales – but apparently it does (really! see photo :). Jokes apart, the big news in the financial world came last Thursday when J.P. Morgan boss Jamie Dimon announced that his firm has lost $2 Billion due to a rogue trader in their London offices simply known as the “London Whale”. Apparently, the loss was incurred when the Whale put on a trade to hedge JPM’s credit risk. Now the hedge has gone awry, and the worst part is the story is not over yet. JPM is unable to get out of this trade now, as there are no counterparties to take the other side to close out this trade. Everyone knows this is toxic crap, and nobody wants to touch it with a bargepole. JPM expects further losses in the coming quarter from this trade. And as usual, nobody knows exactly what this trade is – because these derivatives are unregulated in an opaque market. Unless you’re on the other side of this trade, there is no way to know what the Whale did. Boy, do these guys give derivatives a bad name…

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Welcome to optiontiger.com !!

Welcome to the inaugural edition of our blog at optiontiger.com ! We’re living in interesting as well as uncertain times. The global macroeconomic theme plays a key role in what we do here at optiontiger, so it’s a fitting coincidence that we’re starting off with that theme. There is a lot going on in the world right now. As we write this,

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