Gersh; RE:" Bund PUTs, Redux "
>My remarks last week about bond puts...
well quite honestly, Gersh - a lot of folks, including me, thought that OEX ~520 support would hold last week. The drop since then has been a true stock market crash. Without the incredible flight to quality phenomenon, bonds would have relaxed.
I get the feeling that EVERYBODY, being the big funds and financials, needs cash: the funds on account of people cashing out; the financials are probably getting margin calls (or something similar). From what I understand, all the big funds' leverage is traceable back to the BOJ; ya borrow from Tokyo at 0.5% and stick it in DEM or USD - denominated something-or-other. Perhaps some one who knows how this really works can 'splain it all to me (^_^)
Interesting blurb in the WallStreetJournal 'bout the very high, sustained VIX.X causing the PREMs on PUTs to be so high as to render them quite less effective as a hedge since the crash began. Article goes on to say that, hey - this is a real bummer, because the purpose of these derivatives is to provide hedging instruments in the first place.
Larger than life
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