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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Ilaine who wrote (4682)6/10/2001 4:46:18 PM
From: Mark Adams   of 74559
 
think you need to be really, really good at math to understand them, and I am not, so I don't try.

I think you sell yourself short here. Maybe you need to be really good in math to create models that describe how the overall system works, but not to have a basic understanding of what they are and how they may be applied.

For example, one company, I forget which, recently announced they had entered into a 250 million interest rate swap with FTU that exchanged a fixed interest of something north of 14% for a variable rate. In effect, they are assuming lower rates going forward and the swap reduced their interest costs 50 million over the term of the agreement. FTU reportedly had offsetting trades- ie another company that had exchanged variable rates for fixed.

It doesn't take any math at all to understand and archive this tidbit. And respond should their assumptions prove incorrect. Of course, it helps if you have a good enough memory to know who did what. <g>

BTW- picking up the terminology and aspects of Puts & Calls is not difficult. Understanding options increases your flexibility and could improve your long term performance. I don't have the books I used to learn the basics- long since sold on the used market- or I'd make a recommendation. I'm sure there are others that could offer advice on a good intro text though.

There are online calculators to tell you things like implied volatility for 'chains', and the various greeks used to describe how an option should behave. So math isn't a requisite. IMO
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