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  • Reverse Convertibles vs. Consumer Protection [View article]

    I have absolutely no problem with the probabilities or payouts. If people want to sell put options while holding full cash, or go short straddles, or however else you want to tap this payout/probability structure, god bless em. If retail investors wake up one morning and say "hey, I want to bet that the market is overestimating vol on this one stock" I'll cheer em on. I conclude on this remark.

    What upsets me is that this payout is (a) bundled in a way that piles on fees and additional risks that are unnecessary and I'm mostly upset that (b) the put option is embedded in a way that is, imho, designed to be very confusing, and it certainly isn't placed front and center and called what it is. People are terrible with tail risk, and they are terrible with discerning embedded options; why not replace this instrument with a fully-funded put option?

    Oh, because nobody would pay huge fees for that.

    I have no problem with people buying individual stocks, as long as they understand they are buying an individual stock.
    Jun 19 02:30 AM | 1 Like Like |Link to Comment
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