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Something similar has happened only a few years ago, well-publicised. Many people noticed the odd pricing. Some of the people who did notice the anomalies misun
by Arnt 7y ago
Something similar has happened only a few years ago, well-publicised. Many people noticed the odd pricing. Some of the people who did notice the anomalies misunderstood their cause, and decided on a course of action that didn't lead to any correction (well, except for bankrupting a few misunderstanders).
The key is that someone will notice, but that someone need not necessarily understand and act appropriately.
(What happened was that one large company bought shares, futures and options in another, which drove the price of those futures and options up. Hedge funds noticed that the futures and options were too expensive, and decided to arbitrate. When the first eventually disclosed that it had enough futures and options to acquire the second, a whole flock of hedge funds were caught with obligations to meet and no means to meet them.)
- brazzy 7y agoI'm pretty sure you mean the attempted takeover of Volkswagen by Porsche in 2008, but what you're writing is pretty wrong and has very little to do with the discussion about futures. - There were no future contracts involved, at all. Options are a different thing. - Porsche didn't need to "corner the market", i.e. buy all VW stock. They only needed 75% to gain certain supermajority rights. - There wasn't really anyone "noticing anomalies" and misunderstanding them, or trying to "arbitrate" a "too expensive" stock. The VW stock price had been going down as a result of the financial crisis, and a number of traders had shorted it in the expectation that it would go down further. - Porsche actually lost big in the whole affair; they never reached the 75% because they did run out of money, and the loans they had to take on to do it eventually broke their back. In the end, they were acquired by VW, not the other way round.