Soaring soyabean price stirs anger among poor(enviros: the enemy of the masses)

FT ^ | 01/18/08 | Raphael Minder, John Aglionby, and Jung-a Song

[Toddsterpatriot]

Tell me again how option trades are a positive sum trade.

[Rummenigge]

Now first you tell me where on earth you saw a trade that is zero sum. (That’s why traders trade isn’t it ?)

[Toddsterpatriot]

Now first you tell me where on earth you saw a trade that is zero sum.

Futures and options trades.

[Toddsterpatriot]

Then there’s those trading the options to buy on a certain date on a cerain price. These guys make the most of the money nowadays

Option traders as a group do not make money. Is that clear enough for you?

[Rummenigge]

only that it means nothing if you are discussing the theory of weather or not the market for innovative financial products (nice name - it speaks to you) derivatives is driving the costs of the underlying goods or whatever is underlying.

And my sinister plan was to start a discussion on that.

[Toddsterpatriot]

derivatives is driving the costs of the underlying goods or whatever is underlying.

You'll have to explain how that works. Last time I looked, the buyers and sellers of derivatives were in balance.

[Rummenigge]

And the emitting institutions ? Are making money - the faster the market the more.

And the hedge fonds - drive the market by having to buy after selling short - creating volatility thus driving the value of their options. (options are climbing on increased Alpha)

And if they are going long ? It’s getting to expensive to buy calls for the customers in real need for the underlying bean. So putting them on stock gets a cheaper alternative. Buying and selling increases with the hedge fonds in control of the cycles.

Volatility is expensive for those who have to buy a good.

Options are traded with high leverage and with borrowed money and with increasing speed - maybe it’s all meant to be symmetric but you can sell one side of the ballance and hold the other one and cover your debts from yesterday with the turn over of today because the derivative market is convex.

I have not understood all the details - but it all looks like a giant chain mail. (they are better the more complicated they are)

[Toddsterpatriot]

And the emitting institutions ?

I'm not familiar with this phrase. Please explain further.

[Rummenigge]

the issuer !

[Toddsterpatriot]

The issuer of the option?

[Rummenigge]

look up SG3R3N - it’s a call option on the nickel future of the LME - emitted by societe generale.

[Toddsterpatriot]

The profits (if any) of the option seller is offset by the losses (if any) of the option buyer.

[Rummenigge]

then how come you have to buy for a higher price then you would be paid when you sold in the same moment ?

[AmericanVictory]

Doing the bio-fuel boondoggle turns out to be not be such a smart holy cause.

[Toddsterpatriot]

That’s a bid ask spread and it doesn’t change what I said.

[Rummenigge]

It certainly is the nature of every deal between two people that the sum of money in their pockets remains the same.