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Archive for the ‘Derivatives’ Category

As if attacks from paparazzi and star-crazed fans were not enough, Hollywood stars may soon have a literal price put on their heads by investors in the Cantor Exchange, a real-money trading platform where people can bet on the gross profits of upcoming movies. Sales of The Dark Knight skyrocketed after Heath Ledger died unexpectedly, and so did sales after the deaths of Michael Jackson, Elvis Presley and Marilyn Monroe. Will greed-driven investors now be laying in wait for the stars of movies they have bet on?

The Cantor Exchange (CE) is based on a virtual trading platform called the Hollywood Stock Exchange (HSX), a web-based, multiplayer simulation in which players buy and sell “shares” of actors, directors, upcoming films, and film-related options. The difference is that where the HSX uses virtual money, CE will turn the game into a real casino using real dollars.

On April 21, Cantor Exchange reported that it had just received regulatory approval from the Commodity Futures Trading Commission (CFTC), which oversees futures exchanges. “This is a significant step forward in achieving our ultimate goal,” it said in a letter, “which is to launch a market in Domestic Box Office Receipt Contracts.”

Having “contracts” out on movies and movie stars, however, has an ominous ring; and the Motion Picture Association of America (MPAA) apparently doesn’t like the sound of it. The Cantor letter said that its tentative launch date of April 22 was being delayed because the MPAA and others “raised concerns about the economic purpose of this market and its usefulness as a hedging vehicle.”

The legitimate hedgers, the moviemakers and equity holders with a real financial interest to protect, don’t want it. But Cantor is pushing forward, because gambling is big business and there are vast sums of money to be made.

Critics are worried that the new exchange will turn Hollywood into another derivatives casino, vulnerable to insider trading. Even if traders aren’t hiding behind bushes waiting to trip up the stars, the exchange could create bizarre incentives for moviemakers to manipulate and distort the market for their own products, perhaps intentionally sabotaging movies they know are losers.

THE DERIVATIVE CRAZE

A”derivative” market is one that is “derived” from an underlying asset, but participants don’t have to own the asset to play. Like gamblers at a race track, they can bet without owning a horse. Derivatives have now become a $605 trillion industry, about ten times the gross domestic product of all the countries of the world combined. This money is not contributing capital to businesses, helping the economy to grow. Rather, it is being diverted into wagers. Money is made by taking it from someone else.

Worse, half the wagers are negative: the players want the thing to fail. Warren Buffet called derivatives “financial weapons of mass destruction.” By massively short selling a stock or a currency, speculators can actually force the price down. Derivatives can be used to sabotage not only businesses but whole economies. Derivatives have been blamed for such economic disasters as the collapse of Japan’s stock market in 1987, the Asian crisis of 1998, and the recent collapse of Greece.

GAMING THE HOLLYWOOD GAME

Max Keiser, who founded CE’s virtual forerunner HSX in the 1990s, has firsthand knowledge of how the Hollywood exchange can be abused. When he was CEO of HSX, he says, he came under pressure from fellow board members to give in to studio heads who were offering cash and other inducements to manipulate the prices of projects, either up (to legitimize more marketing dollars) or down (to sabotage competing projects). “These guys, including my own board of directors,” he says, “could not tell the difference between marketing and market manipulation.”

Whether a movie’s stock price rises or falls is considered to be a predictor of the movie’s future success; but Keiser warns that today, the prediction value of market pricing is largely a hoax. Traders using sophisticated computer programs have learned how to manipulate prices, and market rigging has become institutionalized. He predicts that his altered HSX computer technology, if approved by the CFTC for use in a real-money exchange, will produce an insider trader’s paradise, with Hollywood going the way of Enron and Lehman Brothers in two years or less.

“But this is what rigged market capitalism is all about,” he says. “It’s not economics really. It’s arson. They bet against a company or a country and then burn it down.”

When I managed national real estate and construction for the then ‘Tiffany’ of investment firms I learned from the CEO that should the 1932 Glass Steagall Banking Act ever be rescinded-it was certain that speculators would game the system and cause another Great Depression.

Wanting to know more I became licensed on all exchanges-and started paying close attention when derivatives were de-regulated in 1992. Gold at the time was $300. Today it’s over $1,000 with China, Russia, France and the UN calling for the USD to be removed as the reserve currency, a status that has long shored up our economy.

In 2003, Warren Buffet termed derivatives ‘financial weapons of mass destruction created by mad men’. At that time their ‘value’ stood at $9 trillion. Today, that number has reached $1.4 quadrillion and continues to expand geometrically.

Can you picture even $3 trillion? In stacked-up dollar bills it would reach from Earth to the Moon 238K miles away. If you’d spent a million dollars each day for 2,000 years ago–even that would ‘only’ amount to three-quarters of a trillion dollars!

A quadrillion is a thousand trillion. A trillion is a thousand billion. A billion is a thousand million. The relative scale of the world’s financial engines in relation to those $1.4 quadrillion derivatives follows in U.S. dollars:

1. The U.S. GDP is $14 trillion.
2. The Global GDP is $45 trillion.
3.Global real estate value is $65 trillion.
4. Global stock and bond markets are $74 trillion.
5. Global derivatives exceed all combined global wealth by 31 times.
6. The global population is 6.8 billion people. The derivatives market is equal to $206,000 USD per every person on the planet.

‘When I Ruled the World’:

The public is right to be angry at the US Big Banks that caused the meltdown: Citi, BofA, JP Morgan, Chase, Wells Fargo–and both sides of Congress that are in their pockets. The banks are still using customer deposits protected by FDIC insurance to speculate in derivatives, instead of lending to small business. They’ve not paid back taxpayer bailouts, and have rewarded themselves with billions in bonuses while raising customer fees.

It’s up to the people to stop feeding the monster banks. Check out the ‘Move Your Money’ online movement. Find out how to determine which local banks and credit unions are well managed, and stop supporting the big banks that are endangering us all, and are turning America into the Coldplay lyric ‘When I Ruled the World.’

After the credit crisis of 2007/2008, a lot of attention focused on exotic “investment” tools known as derivatives. Although exotic in nature, derivative investments are really not that difficult to understand on the surface. Where it gets more complicated is in the details that financial institutions arrange as “one-off” conditions. With regulation, however, transparency will improve and the derivative process should be as generic as what individual investors experience in their own derivative trading.

What is a Derivative?

A derivative is an intangible investment vehicle whose value is determined by an another asset’s value (therefore, a derivative’s value is derived from another asset’s value). If the price of the underlying asset increases by $1, the derivative value will change accordingly. The most common type of “everyday” derivative is the stock option.

How Are Derivatives Priced?

In the case of an stock option, the derivative is priced based on a future, perceived value of the stock. In the case of an option to buy stock ABC at some future date, the expectation is that ABC will be priced higher than the derivative price plus the strike price (the price you agree to pay), allowing for a gain. For example, if ABC is trading at $5 and you buy an option for $1, allowing you to purchase ABC at $10 at some future date, your expectation is that ABC will be at $11 or higher by that future date.

Why Are Derivatives So Risky?

In the example above, the risk lies in the fact that ABC might not reach $11 by the future date. If it does not reach $11, you would not exercise your option (the derivative), meaning that you paid $1 for that option that you will not have had the opportunity to use. Of course, $1 is not much on its own, but multiply that by thousands and it becomes more substantial.

How Do People Make Money With Derivatives?

The people who make money with derivatives are on the opposite end of the transaction of someone who loses money. In the example above, if you bought an option to purchase ABC at $10 and you paid $1 for that option, the person who gets the $1 makes money. That person will also get to keep ABC stock if it does not reach $10. Therefore, if ABC is priced at $5 when the derivative is sold and it only makes it to $9 by the strike date, then the person who sold the option makes $1 on the option sale and will have enjoyed an unrealized gain of $4 on the underlying ABC security.

The most common uses for derivatives is to generate income (as in the case of the person who sold the ABC option) and to hedge against potential losses (insurance). However, when large financial institutions invest billions of dollars into these types of instruments with the potential for 100% losses and no underlying asset (i.e. it is intangible) the prospect for mass failure is huge. For this reason, using derivative products should only be considered by educated and high net worth investors, or speculators who are comfortable with the complete, potential loss.

Emule is basically an open-source file sharing program which shares users with the eDonkey2000. The source code of this software is available to everyone. Its not surprising, therefore, that you’d find numerous mods online. Anyone who knows the programming language C++ can create a derivative of Emule, a derivative with its own unique features that you can put online as Emule free download.

The Popular Emule Derivatives

There are many famous derivatives that are available as Emule free download. You can download them easily. All you need is your computer and fast internet connection; and you’d be all set. Some of the popular mods include iONiX, MorphXT, NeoMule, NetF, Sivka, tHe PHoeniX, Webacache, Xtreme and ZZUL. These are all Emule download free versions.

The Difference between the Mods and the Original

Mods have various features unique only to each and one of them. Often though, they share similar features that are marked improvement from the Original client. There are mods that would experiment with coding to avoid provider restrictions, quite similar to the attempts of BitTorrent. These experiments have been, however, frowned at. Some people argue that providers could easily switch to Stupid Throttling – a bad news to consumers. This switch would create incompatibility between the Client and the eDonkey network. This would deprive users of better sources when they download emule.

There are mods that have the Webcache control feature. This feature allows for faster data distribution. Most mods also have better source management control and a marked shift from file priority attitude toward file quality data. There are also marked changes on the original client’s GUI.

Avoiding Malicious Emule Free Download

If there are mods that are reliable, there are also unreliable mods. You just have to be careful when you download Emule. These mods contain malware like spyware, adware and Trojans. Most malicious mods are filtered out, however, by Emule. If you end up downloading a malicious Emule download free mod, perhaps, you can look into some online forum. People would graciously give advices on how to remove the software, how to avoid the malware and which mod to choose.

Working Emule Free Download on Windows Vista

Essentially, Emule is a P2P application that is designed primarily for Windows platform. This is perfect for users of eDonkey and Kad Networks. People who using other versions of Windows except for Windows Vista do not encounter problems with downloads and uploads. However, developers of Windows Vista had installed tightened security and access control in Windows Vista.

Users of this platform experience difficulty whenever they would attempt to download Emule. They could download and install Emule but they encounter problems when they try to download files. Often, the files would get stuck at 99 percent download. If this happens to you, it might be a good idea to check on what version of Emule you downloaded. Some mods do not support Windows Vista. However, the latest versions of Emule starting from Emule 0.47c support this Windows platform. There are some suggestions only on how you can run other Emule versions on Windows Vista. You can inquire from online forums or search through your favorite search engine.

There is little doubt that the spectacular collapse of the global financial services industry between 2007 and 2009 brought one type of investment product into the spotlight: derivatives. In all fairness though, one can attribute the banking crisis more on poor control weaknesses (e.g. inadequate risk appraisals) rather than on an inherent problem with the investment vehicles themselves.

One thing is for sure: you can never completely eliminate risk from any investment. You can only manage it. Even with derivatives, you can still make a healthy reliable return as long as you get your investment strategy right. Binary options are one type of derivative through which you can achieve this consistent return.

Binary options represent one of the simplest derivative products. By definition, it is a type of investment vehicle in which there is either one of only two consequences depending on your accurate prediction of an underlying asset’s future price going past a specific ‘strike’ price by a certain time in the future when you purchase the option. If your prediction is correct, you are paid a fixed predetermined amount that is independent of the actual asset value.

However, if the asset value does not go past the strike price at maturity, you will receive no payout. It is for this reason that binary options are also referred to as all-or-nothing options or digital options. Another commonly used term especially In the United States financial markets, is Fixed Return Options (FRO). The nature of the underlying asset can be broad and could include stocks, precious metals, crude oil or even currency exchange rates.

When investing in binary options, there are three key factors that determine whether you lose or gain: the strike price, maturity date and the price behavior of the underlying asset. If you are to stay on the positive side of things as far as binary options are concerned, you must understand these three factors. Of the three, understanding and anticipating the price behavior of the underlying asset is probably the most important.

Binary options are a good means for hedging against adverse weather patterns like typhoons, hurricanes or high temperatures that have an impact on commodity prices. They are also used to protect investors from the effects of inflation or deflation. One of the reasons that make this type of derivative product ideal for a regular return is that your loss or gain is not dictated by the magnitude of price movement but only by its direction. Once the asset hits the strike price, you know exactly how much money you stand to make.

This is quite different from the price differential gain or loss on an investment in stocks or bonds. In such cases, if the price goes below the strike price, the investor will suffer a loss equivalent to the difference between the strike price and price at maturity. Such an investor will only make a reasonable profit if the stock price appreciates and by a big margin. In this regard, binary options carry less risk.

Futures trading can be used for two main purposes; Speculation and Hedging. While most retail traders get involved in futures trading for the purpose of leveraged speculation, it cannot be forgotten that the true purpose of futures contracts is for the purpose of hedging.

Hedging using futures is technique most professional money managers use. However, there is one main problem with hedging using futures and that is the fact that the settlement price of futures contracts isn’t the actual spot price of their underlying asset. That’s right. In other words, the price basis used by futures contracts isn’t the actual price of the underlying asset but a price derived from the actual price known as the “Settlement Price”. The problem with settlement price is that it can vary significantly from the actual price of the underlying asset and this difference in pricing may cause problems with hedging using futures contracts.

Settlement price is determined at the end of each trading day or trading period by various methods, including price averaging across a certain period and reflects the future price expectation of the underlying asset at various expiration months. This is why futures contracts of different months have a different price even though they are all based on the same underlying asset.

As a result, it is nearly impossible to hedge a position to delta neutrality completely using futures.

This is also why options are becoming the new favorite hedging instrument of professional portfolio managers and are used much more commonly in stock hedging than their single stock futures counterpart.

Options base their price on the actual price of the underlying asset itself instead of a derived price of the underlying asset. As such, options are capable of the precise level of hedging that futures are not quite capable of.

Traditionally, futures contracts have been used for price protection between buyers and sellers of a particular commodity. By entering into a contract to trade the commodity at a specific price right now, buyers are protected against price hikes and sellers are protected against price drops. This is the hedging function that exchange traded futures still perform but the fact that the settlement price of a futures contract only converges with the spot price of the actual underlying asset close to or on expiration date itself, it is hard to use futures for precise short term hedging that may last only days and comes nowhere close to the expiration date.

Derivatives instruments such as futures and options are originally designed as hedging tools. As the demand for highly precise hedging over very short periods of time increases, futures are slowly becoming less popular compared to options in terms of non-commodity hedging.