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Simple derivatives like calls and puts are unbannable. Observe that I can replicate the payoff of a call option by borrowing money to buy the stock [1] or repl
by nostromo95 9y ago
Simple derivatives like calls and puts are unbannable.
Observe that I can replicate the payoff of a call option by borrowing money to buy the stock [1] or replicate a put by shorting a stock and lending money.
[1] http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/optionbasics.pdf http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/optionb...
- Twisell 9y agoBut it's way more risky cause you could end up loosing more than the price of the option. Thus people would be more careful which is an improvement in my point of view. Re-establishing the uptick rule would be a middle ground between banning totally and current speculative frenzy.
- nostromo95 9y agoNo, you can replicate the option exactly if you keep re-weighting the debt and stock ownership. Granted, this is only really feasible for large institutional investors, but you can do it.