JPM Derivatives Monster

Discussion in 'Trading' started by DT-waw, Aug 4, 2002.

  1. I dunno enough about the subject...but what I've read so far would tend to put the fear of God into one.

    I do understand 712X leverage, though. Gotta wonder if they're long or short premium.
     
  2. I have heard of this exposure in the past. I assumed that a lot of it was hedged against each other, and hence the net exposure was minimal. However after seeing JPM hit a trisecta last year in losses (GX, ENE, Argentina) and how they're on path to hit another trisecta this year (ENE again it seems, Brazil, WCOM), I have to assume that they have no idea what they're doing at all. I intend to start a new put position in JPM using leaps. They won't make it.
     
  3. Not to mention whatever deals we haven't heard about. I like leaps for that reason. What do you expect to pay for them? Remember though that they are 'too big to fail.' (meaning that they will be bailed out, not that the stock can't go to a quarter).
     
  4. buying a derivative against jpm, gotta love it
     
  5. Who's on the other side of those trades?

    Provocative, indeed.

    But you really have to know what these bets are on...I think there's more to this picture than the article is saying.

    It's like saying, I'm carrying an options position aggregating at 700 times my net worth...there is no information communicated about my net exposure (even though excessive financial speculation is just one of the many phenomena the world today has in common with the then peaking and soon-to-crumble Roman empire).
     
  6. chasinfla- Lets assume that almost all are hedged out against each other for a net of almost no exposure, 700+/1 is huge, even if most are a nil, 25/1 is large... don't you think. Finally, as I showed in my 2 straight years of trisectas, these guys really aren't too intelligent in their risk control dept. I assume that there are many more bad loans that we don't yet know about.
     
  7. Thanks for those links. Very interesting.

    As I was reading it (this link, I haven't had time to read the original essay yet), my first reaction was, "So what if JPM has a huge share of the derivatives pie. I am more concerned with their overall delta position than their market share." Then I even thought, "What if Long Term Capital Management had been standing on the other side of the boat (or even had not been an UNHEDGED HEDGE FUND :D :D. Then their huge leverage would have been no problem." But then, when I realized the amount of leverage being used to achieve this market share, it scared the hell out of me, and I have no accounts in JPM!!!!! It scares me to think what a problem this could cause with the foundation of our economy and our banking system!!!!!:mad: :mad: :mad: Where the hell are the bank regulators when you need them? :mad: :mad: :mad: I'll tell you. Just like all regulators, in my opinion, they are too busy out there crawling up some little guy's ass.

    I must say, they make a very good case that JPM is just a hedge fund in bank's clothes.

    Can anyone say "Berings Bank":D :D

    Again, thanks for the links DT-waw.
     
  8. Babak

    Babak

    P2, what is a trisecta?

    Here is the original essay:

    http://www.zealllc.com/commentary/monster.htm

    Notice that most (62%) of JPM's exposure is to interest rate derivatives. A small portion (relative) is to credit/fx risk.
     
  9. bro59

    bro59

    A trisecta occurs when one is forced to use last year's cat, which was in turn the previous year's cat, for the college course in anatomy where you cut up cat's. Shoot education budget cuts have to cut somewhere, recycling cats can save ya a ton of money.
     
    #10     Aug 4, 2002