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This ranks right up there with accounts that sue to recover losses on their
hedges but for purposes of the suit don't show off setting gains in the
hedged asset.
Several years ago I was deposed (I only traded out of the same building
with the broker the complaint was lodged against) in a case where the
savings and loan (if I remember right) had used futures and options to
hedge treasury and mortgage positions. The hedges were placed in a bull
market and were caught in a basis shift and there were losses, but much of
the loss was offset by appreciation in the underlying asset. For Instance:
Hedge loss of 3.5mm and gains in the underlying portfolio of roughly 2mm.
Guess what, suit (and judegement) for 3.5mm plus commissions.
Oh well..... a good lesson when working with OPM.... cover your backside
and document every inch of every foot and even then you may still be in
trouble if something goes wrong.
Stewart Taylor
Taylor Fixed Income Outlook
Voice: 501-219-9774
Fax: 501-228-0963
E-Mail: staylor@xxxxxxx
Web Site: http://www.cei.net/~staylor/
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