The Top Deadliest Mistakes in the world of Financial Derivatives:
1. Participating in a concentrated position with a risk/reward relationships corresponding risk dollars being greater than an acceptable percent capital loss (as compared to the account size). In this case, the trader has an affinity to a position that is so strong, he believes it is only possible to have the desired (winning) outcome. He ignores the possibility, even remote, that if the unthinkable happens it will result in a major loss to the net liquidation value of the account. My rule of thumb is to not enter a concentrated position that can cost more than 1-10% of the liquidation value of the account.
2. Speculation. This risk entails entering a position where the trader believes the market will move in his direction. Whether right or wrong, eventually the trader will be wrong. I recommend evaluating both sides of the position and realizing it is just as possible for the market to move against you.
3. Vega Drop Sucker Play: In this case, the trader sees ultra cheap calendar spreads (many times with wide spreads) and believes that vega will stay constant. If Vega does stay constant the trader is mesmerized by the potential profit and enters a position too large for the size of the account. It is my belief that the trader should limit position size to a percent of the equity in the account. The real risk here is that month to month volatilities are not necessarily constant. If news breaks and volatilities drop in both months, the calendars will actually decrease in value even when the underlying stays within the target range.
4. European non-exercisable calendar inversion: This risk lures the trader into believing a calendar spread (the too good to be true adage) with an ultra low price can pay hundreds of percent of return in only one expiration. The real risk lies in the possibility that the spread will become inverted, or negative, and the trader will owe money at expiration.
5. Early exercise risk: In this case, the trader sells deep in the money put calendar spreads as an example. When the extrinsic value of the put is less than the carry costs of the call at the same strike, an exercise will usually occur. When this occurs, the trader is forced to buy stock at the strike price and it is delivered the next morning. The buying power on the account is reduced by the margin required for the stock. The trader can either exercise his long option (if he owns one) or sell the stock.
6. Early assignment risk: In this case, the trader sells deep in the money call calendar spreads. When the extrinsic value of the call is less than zero, assignment may occur. If assignment occurs, the trader is forced to borrow stock at the strike price and the stock is shorted in the morning. The buying power on the account is reduced by the margin required to be short stock. The trader can exercise his long option (if he owns one) or buy back the stock.
7. Delta risk on boxes: Most of the time, delta risk is negligible on boxes, but some boxes carry real deltas, specifically boxes written on tickers that do not respect put call parity. This is usually found on hard to borrow stocks. If you are short boxes on a stock with a hard to borrow skew, you may find you are actually short deltas. If you do not hedge them, you are exposed to delta risk.
By CHRISTINA CARON Many of the 30000 residents who evacuated their Santa Barbara homes can start to return home. Calif. wildfires have destroyed 8600 acres and at least 80 homes.
By ANDREA KANNAPELL The Pakistani military pressed its multipronged assault on three Taliban-held districts northwest of the capital, Islamabad, on Saturday, claiming significant gains but also blaming militants for endangering noncombatants by firing ...
South Africa is facing hard times economically, its newly inaugurated President, Jacob Zuma, warned in his acceptance speech. "Jobs are being lost in every economy across the world," he said.
By RACHEL DONADIO AMMAN, Jordan - Visiting a mosque on the second day of his closely watched first visit to the Holy Land, Pope Benedict XVI on Saturday denounced the “ideological manipulation of religion” and called for greater understanding between ...
KABUL (AP) - The US coalition blamed Taliban militants Saturday for causing what Afghan officials say are dozens of civilian deaths during a prolonged battle that included American airstrikes.
By Steve Holland WASHINGTON (Reuters) - A White House military aide who authorized an Air Force flyover of New York that caused panic among some people in the city resigned on Friday.
By HELENE COOPER WASHINGTON - President Obama on Saturday called on Congress to pass a bill intended to stop credit card companies from imposing certain late fees.
By Eric Moskowitz, Globe Staff MBTA General Manager Daniel A. Grabauskas says he's going to ban the possession of cellphones by the operators of trolleys, trains, and buses on the public transit system, after a trolley crash Friday night that officials ...
Morgan Stanley and Wells Fargo sold more than $15 billion of shares and bonds, as the two companies rushed to the head of the line of banks looking to raise funds following government stress tests.
The US lost 563000 jobs in April, down 100000 or so from the 663000 jobs lost in March. But the unemployment rate continued to rise, increasing from 8.5 percent in March to 8.9 percent last month, according to the Bureau of Labor Statistics (BLS).
By Lisa Belkin The National Retail Federation tells us - surprise - that Mother's Day spending is going the way of Christmas spending and most other spending this year, namely, down.
European Union (EU) antitrust regulators have set an early June date for an oral hearing during which Microsoft Corp. can defend its practice of bundling Internet Explorer (IE) with Windows news reports said today.
CAPE CANAVERAL, Fla. (AP) - In what's expected to be the last time ever, both of NASA's shuttle launch pads are occupied. Atlantis is on one, primed for a flight this coming week to the Hubble Space Telescope.
Stay-at-home rock stars will have more entries in the best-selling Guitar Hero video game series to fuel their fantasies of pop glory, Billboard reported.
By DAVE ITZKOFF It takes a certain mix of optimism and frustration to contemplate the possibility of space travel. To dream of navigating the cosmos is to assume that man has the resources and the know-how to propel himself into the heavens, ...
Shanna Moakler and Keith Lewis, codirectors of the Miss California USA pageant, are holding a press conference Monday morning to announce the fate of controversial crown holder Carrie Prejean.
Seems you can have your chicken and eat it too...albeit a little later than expected. After hoards of hungry Oprah fans were turned away from KFC outlets across the country earlier this week, the fast-food chain is now sending out rain checks to ...
by Ken Rosenthal Ken Rosenthal has been the senior baseball writer for FOXSports.com since Aug. 2005. He appears weekly on the FSN Baseball Report and MLB on FOX.
By Maggie Fox, Health and Science Editor WASHINGTON, May 9 (Reuters) - The new strain of H1N1 influenza popped up in Japan and Australia and has now been confirmed in more than 2000 Americans but health officials said on Saturday this was a great ...
By LARRY ROHTER MEXICO CITY - Just for argument's sake, let's compare Mexico's management of the swine flu epidemic that broke out here last month with China's handling of SARS in 2002.
By ADAM LIPTAK WASHINGTON - A couple of days ago, Fred R. Shapiro, the editor of The Oxford Dictionary of American Legal Quotations, asked constitutional law scholars for memorable quotations from Justice David H. Souter of the Supreme Court.
President Obama unveiled a budget Thursday with a 2010 price tag of $3.5 trillion financed with $1.2 trillion of new debt. For domestic agencies, that's a 9.3% spending hike over last year.
I'd be very surprised if the key Democrats at the time weren't briefed on a lot of this stuff. And to the extent that they didn't know the details, that it might have been not wanting to know rather than having been kept in the dark.
At least four people were dead this morning after severe storms hit Missouri and Kentucky. Thousands had their power knocked out, officials said. One of those was Glenn Bryan, 68, of Pomona, Missouri, who left the safety of his basement to get a battery-powered radio only to find a tornado bearing down on his house. "I thought I'd be gone to the woods," Bryan told CNN affiliate KYTV. full story
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Featured: Magnet Motors > Mylow > Videos > High-Resolution Video Files of Mylow's Magnet Motor Available - On May 6, Mylow conveyed around 20 of his original mpg video files to us to make available for download. The spinning motor videos are especially valuable. In order to cover bandwidth costs and to provide additional revenue to support this project, we are making those available for a small fee. (PES Network; May 9, 2009)
Featured: Magnet Motors > Mylow > In the News > Mylow magnet motor crop circle; glass table video - On April 29, a crop circle was found in Wiltshire County, UK -- the same day Mylow posted his first video showing his bar-magnet motor. That and several other crop circles that showed up in that region seem to be commenting on Mylow's motor. See Mylow's long-awaited demonstration of his all-magnet motor on a glass table. (PESN; May 3, 2009) (Comment at Examiner.com)
EV > Hybrids > Plug-in > Raser Technologies Unveils 100+ MPG Plug-in Hybrid Hummer - Raser Technologies, Inc. unveiled a 100+ mpg Hummer H3 powered by Raser’s plug-in hybrid E-REV (Extended-Range Electric Vehicle) at the 2009 SAE International World Congress, Cobo Center, Detroit, MI. (Reser press release; ~Apr. 24, 2009)
EV > Hybrids > Plug-in > 100 MPG Bright IDEA Unveiled - The IDEA plug-in hybrid is designed specifically for commercial and government fleets. It has a 30-mile all-electric range before the hybrid engine takes over, which achieves 70 mpg. (EcoGeek; April 21, 2009)
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Featured / OS: Magnet Motors > MYLOW's Magnetic Motor based on Howard Johnson's Design - YouTube user "Mylow" of Chicago has apparently successfully replicated and is now open sourcing the late Howard Johnson's all-magnet motor, Stonehenge model, that Johnson worked on in the early 1980s to demonstrate to the U.S. Patent Office. (PESWiki; March 18, 2009)
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Featured / OS: Magnet Motors > Achilles Ligeras' Magnetic Engine (ALME) - After building a working prototype, "Archie" is now open sourcing the design here at PESWiki. He claims that his prototype (now broken) reached upwards of 1500 rpm for 45 minutes, and ran continuously at a lower speed for 48 hours. (PESWiki; Sept. 29, 2008)
John Bedini's Simplified 'School Girl' Motor and Battery Energizer - Complete set of plans and instructions posted, with list of successful replications, data, theory. None of the many (that we know of) who have replicated the device as presented here have achieved over unity.
Featured: OS > What You Can Expect Open Sourcing Energy Technology - Sterling Allan describes how an ideal open source energy technology might roll out from beginning -- even before it is publicly posted -- through the time of early replications, to end when it spreads throughout the earth to bless mankind. (PESWiki; July 13, 2008)
PowerPedia is an encyclopedia that the comunity shares, building it together, maintaining it, fine-tuning the information to become the best repository available on alternative energy subjects.
One of the most brilliant inventors of history and was of an unusual intellectual vision and is affectionately referred to as the "Father of Free Energy".
Kawai Motor - There have been too few articles about the Kawai motor and how it would work. Here I try to explain and also suggest a way of modifying your own Hybrid variety of stepper motors.
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Steven Marks' Toroid Power Units - Five 1997 videos of several solid-state TPU prototypes posted. Small unit (6" diam x 2" high x 1" thick toroid) is shown powering a 100W bulb, a 3-amp drill, a television, and a small vacuum. Said to harness the power of the Earth's electromagnetic field.
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(7:48 min) Mylow's Replication of Howard Johnson's All-Magnet Motor -- Last Video (Apr. 3), after the MIB incident. See plans. Annotations by Sterling Allan.
Evaluating and Open Sourcing Clean Energy - Video of Sterling Allan's presentation at the Gnomedex conference in Seattle on Aug. 11, 2007 talking about screening the best technologies, and using the open source model to break the log jam on exotic, disruptive energy technologies.
Top 100 / Featured / Videos: Geothermal > Raser > PESN Releases Video of Raser Geothermal Ribbon-Cutting - Sterling Allan and Robert Pritchett report on the Nov 6, 2008 ribbon-cutting event for the first of 8+ geothermal plants being built by Raser Technologies, which is now commissioned and producing competitive base-load power for a town in California. (YouTube) (PESN Videos; Feb. 26, 2009)
Water4Gas - Simplified device uses a little electricity out of your car's battery to separate water into Hydrogen + Oxygen gas that is 3 times more potent than gasoline. It is added to the air intake of your car engine to improve gas mileage up to 37% by improving combustion. Unique spiraled electrodes produce more gas for less electricity than flat plates. (PESWiki coverage)
Featured / Store: Magnet Motors > Mylow > Mylow Magnet Motor Plans -- Version 1.1 - Sterling presents a concise and clear set of instructions of how to build a working all-magnet motor as described by Mylow, who is the first person we know of who has replicated Howard Johnson’s Stonehenge model from three decades ago. (MylowPlans.com; April 4, 2009)
Featured: Reviews > Breakthrough Power -- a Book for the Masses - Here is a book to both round out your own understanding of game-changing energy technologies as well as to pass out to your family and friends to get them excited about the possibilities and to inspire them to get involved in helping to remove the barriers which have stood in the way of these things coming forward. (PESWiki; Nov. 4, 2008)
Store: DIY > Biodiesel > from Algae > Making Algae Biodiesel at Home - Downloadable 650-page book provides detailed instructions on how to sustainably produce clean oil from algae -- in your back yard -- enough to supply your transportation and home power needs. This is not a simple, afternoon venture, but a serious, long-term commitment.
Store > Electromagnetic > Keppean Scalar Motor > Keppe Releases a New Motor Manual 3.0 - "The Keppe Motor 3.0 uses 70-90% less energy than traditional low-power induction motors and is readily adaptable for practical applications." The motor is based on Keppe’s disinversion of Physics, enabling the design of a motor that allegedly capture the natural scalar energy that exists in space.
A new book, The Fire Dogs of Climate Change, calls PESWiki "The best website for groundbreaking technology." (Sally Andrew; pp. 102-103; Findhorn Press; 2009)
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