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<DIV>While I don't disagree that AG should have raised equity margins to dampen
speculation and leverage, I would note that the drastic increase in HO margins
would not be the first time that margins have been raised by exchange members
when they want to squeeze the speculators. One must never forget that the
speculators trade in the markets at the pleasure of the commercials and exchange
members.</DIV>
<DIV> </DIV>
<DIV>The front (spot) month is always subject to increased risk of margin
changes when the contracts are backwardized i.e. prices are lower in next months
than in front month which generally indicates shortages in the cash market.
Effectively, the leverage on HO has been raised this month from roughly 16:1
($2000 margin ) to 5:1 ($6000) ... still a lot of leverage but a demonstration
of why one should never, ever be trading based on exchange margins. And I
would not be surprised if the commercials are not buying the contracts from the
speculators who are getting squeezed ... good old profiteering by those in
control of the market.</DIV>
<DIV> </DIV>
<DIV>Earl</DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
<A href="mailto:jptaylor@xxxxxxxxxxxxxxx"; title=jptaylor@xxxxxxxxxxxxxxx>James
Taylor</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A
href="mailto:realtraders@xxxxxxxxxxxxxxx";
title=realtraders@xxxxxxxxxxxxxxx>realtraders@xxxxxxxxxxxxxxx</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Tuesday, January 25, 2000 11:25
PM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> [RT] Greenspan Rigging the
Futures Market (again)</DIV>
<DIV><BR></DIV>
<DIV><FONT face=Arial size=2>
<P>Excerpt from today's Market Rap w/ Bill Fleckenstein at <A
href="http://www.siliconinvestor.com";>www.siliconinvestor.com</A>
<P>mentions Greenspan's latest attempt to rig the markets, in order to keep
the (disaster waiting to happen) bubbles alive. I can't say enough bad
things about this criminal Greenspan. What will he say when the US is
plunged into the next depression that he was one of the chief architects of
? I can't be alone in seeing this maniac for what he
is.
<P>----------
<P><B>Hit 'em where it hurts...</B> It's interesting that Greenspan doesn't
seem to notice what the folks at the New York Merc have noticed about heating
oil. This morning, Joanie pointed out:
<P>"Y'all know about the cold snap and the resulting surge in prices which led
crude along, right? Well, <FONT color=#0000ff><STRONG><U>they busted heating
oil yesterday 11 percent in the blink of an eye. How did they do that? (Al.
Pay attention here.) Besides the call for milder temperatures, they had the
audacity to raise margin requirements for February heating oil - are you ready
- by a steep 80 percent, effective on the close yesterday. This margin hike
(which Mr. Greenspan feels is ineffective in controlling stock levels, for
example) is on the heels of a 25-percent margin hike last Friday on crude and
products future trade. So, if you want to weed out the speculators, hit 'em in
the pocketbook, right?" </U></STRONG></FONT>
<P>It just goes to show you that raising margin requirements does cool
speculation, and it's a much more effective tool than raising interest rates.
Of course, when Greenspan raises interest rates he just prints more money, but
that's a different topic. </P></FONT></DIV></BLOCKQUOTE></BODY></HTML>
</x-html>From ???@??? Wed Jan 26 06:27:29 2000
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Date: Wed, 26 Jan 2000 08:37:40 EST
Subject: [RT] Re: [get_traders] Re: W, C and Tactics
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Status:
In a message dated 1/25/00 8:08:29 PM Eastern Standard Time,
bagreg@xxxxxxxxxx writes:
<< David,
If I'm not mistaken, buying puts and selling calls is merely setting up
a synthetic short position in the underlying, which combined with a long
futures position would , theoretically making the position somewhat
delta neutral.
In my view a synthetic position is best used as a proxy for a futures
position, particularly when a change in trend is anticipated, but I
can't see the benefit of combining it with a futures position. I'm a
little rusty in not having traded options for a while now so I may be
wrong.
>>
Lets take an example and show the benefits and disadvantages of options
assume a commodity is at 1000 and you are long
If the previous major hi was at 1100 and you sold the march 1100 calls
used the proceeds to buy the 975 march put.
a your Max loss is 25 points and Max profit is 100
b you can sleep good because if market overnight drops big you are very
well protected
c you can create your own risk reward ratio
d if the future continues strong up move you can take a small loss on
the calls
when future is at 1050. and sell put also,
e you can re install with selling 1150 march calls and buying 1000 put
f now you are still sleeping good with no worry
on a 300 point move in the SP for example (over 2-3 month)
you will net aprox 200 points
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