Trade in Groups

An extremely helpful side effect of the pricing and payoff structure of a binary option (such as a Fixed Return Option, or FRO) is that the bid and ask both represent the probabilities the buyer and seller assign to an event happening. Binary options paying $100 or $0 depending on whether or not the government […]

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The dramatic series of policy decisions affecting our capital markets in the last week generally requires extremely nuanced discussion of the pros and cons, with one exception – the ban on shorting financial stocks. This is a complete perversion of free market principles and will do more to add to market inefficiency than anything else. […]

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Toward the end of July, I suggested that traders should be extremely suspicious of rallies in beleaguered financial stocks like Wachovia (ticker: WB), Citigroup (C), and Washington Mutual (WM), and look to sell or get short on strength. After hitting highs above $19, $22, and $6 respectively, those stocks now sit under $15, $19, and […]

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