Trading CDS

Discussion in 'Trading' started by ralph00, Dec 7, 2009.

  1. Is this available to a non-institutional player or an individual w/less than $100M net worth.

    Anybody have any experience w/these guys ...
  2. A dreadful thing to contemplate... I can't imagine how these people deal with all the logistics of trading CDS with a retail client.
  3. The purchase of a CDS is a simple thing and no more difficult to understand or execute that a put option on MSFT. I'd just like to know if anyplace will allow a basic punter to do it.

    Selling CDS is a whole different ballgame.
  4. You are sorely mistaken... Trading an OTC product, such as CDS, is always more difficult to execute than something like a put option on MSFT, regardless of whether one is selling or buying. Do things like ISDA, CSA and collateral ring a bell?

    Of course, if you truly believe that it's that easy to buy CDS and are happy to skip the annoying paperwork, I'll happily be a seller, your size.

    In fact, this is a brilliant idea... I think I'll start this as a new biz. My company will be called US International Group, Inc. (USIG). I'll be a seller of protection on pretty much anything, including kitchen sinks. Obviously, my counterparties, like yourself, will not demand any collateral, 'cause I am such a nice guy. When/If fecal matter does hit the fan (obv, this is an extremely unlikely eventuality), you and my other creditors can be assured that the Fed govt will make you whole.
  5. Why not make CDS like equity options?

    The underlying is the bond and the options like equity ones?

    with OCC clearing house etc..
  6. That is, in fact, what's happening, but it's happening quite slowly. There's a lot of technical issues, so, for the moment, at least, the mkt is mainly OTC.
  7. sjfan


    Cheapest to deliver, not a single bond (so in this sense a CDS is more like a treasury future option, in some sense).

    In any case, it can eventually be standardized to retail: just trade 'em all points-up-front and you get ride of a lot of settlement issues; but why would retail want to trade this stuff is beyond me (unless credit grind back into some stupidly tight territory ala 2006).

  8. Ideally it would be nice to buy a CDS on your greedy next door neighbor... you could take his nice sports car or sleep with his wife when he defaults...

    Then again, its America, you can do that anyways :)

    But ex-employees buying CDS's ... hard to hedge that risk.
  9. Unless, of course, the neighbor in question happens to own a gun and renders the contract (and you) null and void.
  10. Sounds like it happened to you :)
    #10     Dec 7, 2009