May 21st 2009, 17:22 system announcement
by Bogart Beck
Time for another priceless Bo Beck Rant - Thursday 05/21/2009 - 4:20PM (SLT)
Time for another priceless Bo Beck rant. This afternoon I encountered an advertisement thinly disguised as a News posting on a competing exchange, to wit the following post by Hugo Leckrone, CEO of (ACE:AON) touting a PUT OPTION CONTRACT for his own company (All or Nothing), as follows;
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http://ancapex.net/home/story/AONp/1456
Today, 14:11 AONp ALL OR NOTHING Strike:65L Premium:35L Exp: 90 days (Sept 1, 2009)
by Hugo Leckrone
BET AGAINST "AON" BUSSINES FAILURE
Do you know you can bet for AON´s bankrupcty?
Do you know you can bet AON´s shareprice will drop deeply in the next thress months?
Do you know you can bet AON´s CEO will be fraudulent and will run with the money?
Do you know you can bet against Hugo Leckrone Investment skills and make a profit?
You can buy AON PUTS (IPO are ACE:AONp), and make a maximum profit close to 90% in three months.
**Don´t trade this puts options if you don´t fully understand how options works.
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To be very frank, the above post ALONE underscores one of my fundamental concerns for the current sentiment across several exchanges that are embracing OPTIONS as an appropriate and effective HEDGE STRATEGY for SL-based capital market investments. I’ve been a RW semi-professional Investor for 25+ years; In that time I have NEVER seen a Public entity publish Marketeering Propaganda recommending OPTIONS CONTRACTS against its own security – EVER!
FIRST and FOREMOST, in THIS WRITERS OPINION (for a variety of reasons both simple and complex), IT IS ABSOLUTELY INAPPROPRIATE and HIGHLY UNETHICAL for the CEO of an SL-Based Public Company (or ANY PUBLIC COMPANY) to UNDERWRITE THEIR OWN PUT or CALL OPTIONS * P E R I O D *.
The OPPORTUNITY for abuse, malfeasance, manipulation and profiteering is simply far too great when you have an instance where the underwriter is the issuer of both the OPTION CONTRACT and maintains a controlling interest in the UNDERLYING SECURITY. Think this through for just a few moments folks and the conflict of interest should be self evident.
Secondarily, I am absolutely APPALLED that the proponents of such products would believe that a haphazardly thrown together statement such as “**Don´t trade this puts options if you don´t fully understand how options works” would be sufficient DISCLOSURE and EDUCATION about the inherent RISKS borne by the holder of such investment.
I want to PARTICULARLY CAUTION my FRIENDS and COMPATRIOTS that have been part of this community for some time; DO NOT BE SEDUCED by the flowery verbiage of those who tout such strategies under the guise of “these are simple ‘Vanilla’ strategies that require no math”.
BY DEFINITION, OPTIONS CONTRACTS REQUIRE FIDUCIARY DILIGENCE on the part of the underwriter INCLUDING RISK ASSESSMENT and DISCLOSURE (YES, YOU MUST “DO” AND “DISCLOSE” the MATH) - ALWAYS!
As promised previously, I will BEGIN publishing a brief dissertation this evening regarding appropriate SL-Based Options Strategies. I find this topic timely and important enough that it will take precedent over publishing the Financials for the (5) companies I provide Reporting for – yes, it’s THAT IMPORTANT FOLKS.
Note: I will be unavailable Friday through Monday (U.S. Holiday & Wedding Anniversary) but will post my initial thoughts before I leave so that the community can have time to digest and consider such ideas.