LOL Fink is still wrong. So is Professor Infinitwit
Our board MBA-guru loves Mr. Fink, because Fink said something that supports the MBA's outlandish contention about options trading. Mr. MBA however doesn't do much homework to check his facts, he just rolls out with his my-farts-don't-smell opinions and expects everyone to readily agree with his conclusions.
Now I can understand Fink saying what he said and when you listen to the WHOLE conversation you get a better sense about what he was referring to. But if Mr. MBA is going to subvert the meaning of what Fink said, then he should be able to defend exactly why it is that Blackrock runs MANY funds based on buy-write strategies.
So Mr. MBA, tell us exactly why Fink says one thing, and his funds do the opposite.
From the prospectus of just TWO of their MANY funds that use options strategies:
BDJ: Enhanced Equity Dividend Trust:
"As part of its investment strategy, the Trust intends to employ a strategy of writing (selling) covered call and put options on individual common stocks, indices of securities, sectors of securities and baskets of securities. This option strategy is intended to generate current gains from option premiums as a means to enhance distributions payable to the Trust's shareholders."
CII: Enhanced Capital and Income:
"The fund seeks to achieve its investment objective by investing primarily in a diversified portfolio of common stocks in an attempt to generate current income and by employing a strategy of writing (selling) call options on equities in an attempt to generate gains from option premiums."
Now why on earth would they use these terribly risky strategies???? Ummm...maybe because they aren't so risky, and Blackrock, like every other halfway knowledgeable investor, knows that these strategies SUPPLEMENT and ENHANCE a portfolio.
OOOPPPSS!!! So much for all that horrible risk. So much for Mr. MBA's logic So much for the asinine posts of Mr. MBA.
Infiniti: And like a wily politician, you mismatch metaphors and cliches to try to confuse and divert. Your comparisons to London Whale, while spectacular, are totally off point. The Whale was in engaged in extremely risky Forex and credit swap trading. And while derivatives trading was a significant contributor to the crash of 08, once again, it is totally off point. Neither of these "examples" had anything to do with writing options on owned stock or puts.
As for your "theory" about "competing" against large trained staffs, you really do show your lack of understanding in the area of options. Options, more so than stocks, provides a far more level playing field for ALL players, not just the rich and famous.
Please provide some factual basis for your contention that "Typically, the options written are considerably below 50% of what they own." My reading of the balance sheets for these funds seems to differ substantially from yours. Please point me to the accessible info that backs up your statement.
Lastly, you still have not answered the question put to you. You maintain that options trading is a losing bet. You use Fink to support your theory. You have not explained why, if it is so risky and so dangerous, why it is so widely and extensively used not only by Blackrock, but everyone else. You only say that because they're so big, it's ok for them to use it, but not others.
Also, you claimed that options trading ""is the new "sell the bridge" scheme."". You have not explained what facts you use to make that claim, given that options trading has been around longer than Christ (not only my book of Genesis reference, but the first recorded option trade was around 332BC by Thales of Miletus for an olive harvest).
Just be honest with yourself and the board. Admit that you don't understand options, that you make up numbers as you go along, and you are easily led by any article or comment that supports your weird unsubstantiated theory.
Whitebear...its no concern of mine if you trade options are not. My only reason for continuing the dialog was to open the eyes of those who are misled. Ultimately, one must take his own responsibility for decisions. End of subject .
Whitebear, I will concede you make an excellent point. But those funds are long large portfolios of stocks with options used as a means to enhance income. Typically, the options written are considerably below 50% of what they own. Whats more, when one manages $4 trillion of assets, one can acquire and maintain a full time trained staff and software that competes well with the typical retail investor. So Whitebear, I reiterate you are gambling against the odds of large staffs with far more technical worthwhile than you. Even that doesn't workout for the bigboys as witnessed in the JP Morgan Chase London whale incident. And derivatives trading was a significant contributor to the financial collapse of 2008.