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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: pater tenebrarum who wrote (53949)	6/8/2000 3:22:00 PM
From: LLCF	Read Replies (1) \| Respond to of 116789

<as for the bullion banks, once again, somebody IS assuming the risk in these transactions.> As for the investment banks, I've been assuming that they are essentially hedged. This may or may not be true, but after having worked in derivatives I know we were, and having large naked positions the size people around here are throwing around would certainly be a board level decision. Anyway, it seems to me derivatives get on the books in two ways. 1.) producers [natural longs] sell forward or options to the banks who then hedge on the comex or elsewhere... if we're talking delta hedging this action would actually give them the positon where they get longer on the way up and shorter on the way down [long vol. a stabilizing trading force]. I'm not saying the banks couldn't screw it up and end up with all sorts of other positions, but the producers are natural sellers of vol. 2.) The owners of gold lend it out into the market, those that borrow it must return it at some point... what the hell do they do? Just sell it naked and collect interest and pray? 3.) My scenario if I were still running a derivatives desk would be: Buy the calls from Ashanti, borrow the gold and sell it in the market [netting the i diff.] and trade the position like a giant volatility spread... probably making real nice coin because Ashanti probably pisses their calls away dirt cheap. In any case, I could see Investment banks appearing to have massive short positions if the Ashanti side of the position wasn't taken into account [OTC's often arent]... but really be theoretically hedged [unless Ashanti can't deliver nyuk nyuk]... wonder if that's why Goldman ran in to prop them up?? DAK