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I stopped taking Buffett seriously when Lehman bankruptcy proceedings unearthed a massive exotic derivatives transaction Buffett did with top investment banks.
by richrichie 2y ago
I stopped taking Buffett seriously when Lehman bankruptcy proceedings unearthed a massive exotic derivatives transaction Buffett did with top investment banks. You can google and find the details. He sold a naked long maturity “rainbow” put option on 3 indexes for billions of dollars in option premium.
This was at the same time he was publicly writing eloquent letters on how derivatives are weapons of mass destruction.
- TheAlchemist 2y agoBut it was a very good trade ! The way Buffett used derivatives you describe make perfect sense - they were very long term (15, 20 years) contracts, with no exercise possible before maturity. It's pretty far from the casino land we have now, when a huge portion of trading is in contracts expiring ... the same day.
- richrichie 2y agoIt was a good funding trade for him. Equivalent to billion dollar loan priced at nearly 0 spread. My point was about his condescension and hypocrisy.
- wslh 2y agoWas that investment outside fundamental investment theory?