Re: Greenspan' and Derivatives

["Gary Santos" <evs@xxxxxxxxxxxx>]

Well, if its all a matter of terms and symantics, it doesn't matter. Bottom
line is we are living in dangerous and challenging times.



----- Original Message -----
From: "Stan Jonas" <sjonas@xxxxxxxxxxxxx>
To: "Gary Santos" <evs@xxxxxxxxxxxx>
Sent: Monday, March 17, 2003 8:51 AM
Subject: Re: Greenspan' and Derivatives


Still doesn't it sound a bit like "arbitrage" to you?
Imagine LTCM say the same things.. spread are way above normal....

In the extreme if you don't want to take risk.. buy a T Bill..

----- Original Message -----
From: "Gary Santos" <evs@xxxxxxxxxxxx>
To: "Stan Jonas" <sjonas@xxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
Sent: Sunday, March 16, 2003 2:24 AM
Subject: Re: Greenspan' and Derivatives


> Still, Stan, if a cattle producer sees that prices are way above normal
for
> one reason or another. It is his judgement that prices are bound to
> decrease. For example, more farms were open because of the high price and
> will come on stream with mature cattle in a year or two. The cattle
producer
> might want to hedge not arbitrage by options and not forward selling. If
> prices go against him, he lets his option (insurance) expire. On your
> downside example, he should immediately reverse his position and take the
> licking.
>
> It's all about speculation on a future event and personal judgment based
on
> "knowing" the market one is in.
>
>
> ----- Original Message -----
> From: "Stan Jonas" <sjonas@xxxxxxxxxxxxx>
> To: "Gary Santos" <evs@xxxxxxxxxxxx>
> Sent: Sunday, March 16, 2003 12:30 PM
> Subject: Re: Greenspan' and Derivatives
>
>
> Think that through again..
> What if the producer of cattle suffers a disease setback.. his cattle and
> maybe other's die
> but he's short futures which will be rallying as a result of  the
"plague"..
> hedging as you call it has increased his risk here..
>      b) if you hedge you may end up have cashflow risk.. i.e someone has
to
> fund those margin calls..
>     c) If your competitors don't hedge and the prices of the item you're
> short on the hedge goes up.. you've lost competitive opportunity cost and
> will likely be out of biz...
>
>     d) a myriad other tax and accounting issues..
>
>
> ----- Original Message -----
> From: "Gary Santos" <evs@xxxxxxxxxxxx>
> To: "Stan Jonas" <sjonas@xxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
> Sent: Saturday, March 15, 2003 10:18 PM
> Subject: Re: Greenspan' and Derivatives
>
>
> > Why hedge.. if you think someting is going to go down.. sell it....get
> out..
> > Only rationale to "hedge" is that you think you can structure a defacto
> > positive expected value arbitrage"...
> > ---------------------------------
> > I would think hedging is still very much desirable to producers of
cattle,
> > wheat, gold, etc. when prices are perceived to be high (costs and
margins
> > are known to the producer) and the physical is still in production and,
> > hence, can not be sold.
> >
> >
> >
> > ----- Original Message -----
> > From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> > To: <pkt@xxxxxxxxxxxxxxxx>
> > Sent: Saturday, March 15, 2003 1:16 PM
> > Subject: Re: Greenspan' and Derivatives
> >
> >
> > > Arbitrage is not the same as hedging:
> > >
> > > Arbitrage: Simultaneous purchase and sale of two different contracts
(or
> > > a combination of cash and futures) to take advantage of perceived
> > > mispricing. In a pure arbitrage, mispricing is locked in and a
risk-free
> > > profit made through trades.
> > >
> > > Hedge: A sale of futures contracts to offset the ownership or purchase
> > > of the underlying cash commodity in order to protect it against
adverse
> > > price moves; or, conversely, a purchase of futures contracts to offset
> > > the sale of the underlying cash commodity, again for protection
against
> > > adverse price moves.
> > >
> >
> >
> >
> >
>
>
>
>
>