How to offset personal investments' exposure to the financial sector

kr · Post by kr » Tue Mar 15, 2005 5:14 pm

well if FASB rules that options need not be deducted as compensation, that means the picture is _not_ changing... whether banks put on a big show to defend current practice is another story, and yes it may come up again, but in the near-term this is just a continuation of the same nonsense that's been going on for ages.

to me it's just a question of your spot delta... and if that's ATM options vesting 3y hence, well the delta may not be particularly large, especially w.r.t. your own fractional (very fractional!) contribution to the equity's volatility. Nevertheless it's an evolutionary process and I'd rather that the MD's not just receive all of their shares once they cast off the SVP label, when the proportionality is more significant.

Even the thing about expensing stock options is a bit out of hand b/c it's not so much a question of options as the size of the pay packages for the seniormost people. Question is how to apply pressure to lower the cost, because these guys don't contribute so much (HI MS. FIORINA!!!!) If you are a hedge fund you can take on Mylan Labs because 15% of the float is not too bad (esp. if you do some smart equity swaps!) How you play the activist game on the biggest guys is a different game... I'd like to think this is doable but I am not so sure (cf. Origins of the Crash - i.e. too much incest at the top among boards, investors, etc. - kind of like a story of European royalty or something). Options on equity swaps for 50MM shares, maybe you can trade something like that among the big fund managers but you'd have to be incredibly well-connected.

chiral3 · Post by **chiral3** » Tue Mar 15, 2005 5:18 pm

"well if FASB rules that options need not be deducted as compensation, that means the picture is _not_ changing... whether banks put on a big show to defend current practice is another story, and yes it may come up again, but in the near-term this is just a continuation of the same nonsense that's been going on for ages. "

It is supposed to be a definite now, although it was also a definite just before bonuses for last year, and it got put off, and then put off again. It is supposed to happen. Whatever that means.

Nonius · Post by **Nonius** » Tue Mar 15, 2005 5:27 pm

by the way, I have a bunch of stock options that I can exercise but NOT sell the stock until August 2...phuck me...SuckCool, in my opinion, probably will not edge much higher...plus, I wanted to exercise, convert to USD at this relatively phat exchange rate....

so, what to do? i guess I could sell a similar unrestricted option....if I could only collateralize it with my contract somehow.....probably expensive.

kr · Post by kr » Tue Mar 15, 2005 5:37 pm

do you believe SuckCool is the buyer or the target vis-a-vis eurobank consolidation?

how 'bout you sell similar, push the strike OTM a bit more and jack up the size, so's the delta remains quite low, take a little bit of risk but take it later rather than earlier

Energetic · Post by **Energetic** » Tue Mar 15, 2005 5:38 pm

[i]1. Ignore the risk, or even embrace it. One of my former bosses said: "Diversification is the way to stay middle class. To be rich, you have to bet big, and I'm putting all my money in my firm's stock."[/i]

Nonius beat me with the Enron retort.

[i]5. Go long every other sector, and optimize weights based on correlation with the financial sector.[/i]

Yes, but ... On a practical level, if you lose the ability to make money you're phucked anyhow.

Nonius · Post by **Nonius** » Tue Mar 15, 2005 5:47 pm

[i][b][/b][/i]

TonyC · Post by **TonyC** » Wed Mar 16, 2005 11:48 am

> . . . if I could only collateralize it with my contract somehow.....probably expensive.

twenty-first securities corp. . . [in nyc]