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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lee who wrote (1939)	10/28/2001 2:24:14 PM
From: KyrosL	Read Replies (1) \| Respond to of 99280

OT I think the extreme bears are talking about this scenario, using your numbers: JPM has a trading position of $10,000 IBM long. It hedges the position against an extreme fall in IBM with IBM puts worth $25. The market crashes, IBM is cut in half and the seller of the puts defaults. JPM is stuck with a 50% loss of the notional value. The counter argument to this scenario is that nothing like this has ever happened in modern markets, but, theoretically, it is possible.