The hottest Derivatives Substack posts right now

And their main takeaways
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4 US banks crash in 2 months: Banking crisis explained by economist Michael Hudson

Geopolitical Economy Report • 458 implied HN points • 07 May 23
💰 Finance Banking Regulation Derivatives Market volatility
  1. Economist Michael Hudson discusses the collapse of four US banks in two months, including First Republic Bank being taken over by JP Morgan Chase, highlighting the deep ties between government regulators and bankers.
  2. The collapse of banks like First Republic Bank can be attributed to high ratios of uninsured deposits and risky long-term mortgages, demonstrating systemic issues in the banking sector.
  3. The banking crisis is a result of the government's bailout policies, with large banks like JP Morgan Chase being given favorable deals despite being rated as the riskiest, leading to the undue burden on the economy and the potential for a deep financial collapse.

Ayahuasca and the Simulacrum

The Dollar Endgame • 359 implied HN points • 03 Nov 23
💰 Finance Economy Markets Central Bank Derivatives Monetary Policy
  1. Jorge Luis Borges' fable "On Exactitude in Science" explores the concept of representation and the consequences of abstractions overtaking reality.
  2. Psychedelics like Ayahuasca can challenge our perceptions by dissolving the ego and blurring boundaries between the self and the external world.
  3. The modern financial system, with its heavy reliance on derivatives, has created a simulacrum that central bankers manipulate, leading to a dangerous dependence on fake money.

Why 3 US banks collapsed in 1 week: Economist Michael Hudson explains

Geopolitical Economy Report • 358 implied HN points • 15 Mar 23
💰 Finance Banking Regulation Derivatives Interest Rates
  1. Economist Michael Hudson discussed the collapse of US banks, noting similarities to the 2008 financial crisis and the reliance on government bailouts.
  2. The Federal Reserve's handling of interest rates and bailouts in response to bank collapses indicates systemic issues in the financial sector.
  3. Derivatives, specifically highly leveraged bets, are looming as a significant risk for the banking sector and could trigger the next big crash.

Why Crypto Options Matter Now

DeFi Education • 299 implied HN points • 21 Oct 23
🔮 Crypto Trading Market Trends Options Derivatives Investment
  1. Crypto options markets are growing even when other areas of trading are down. This is important to note because it might indicate future recovery in the industry.
  2. Deribit is the largest exchange for crypto options, and their trading volumes are increasing.
  3. Investors should pay attention to the growth in crypto options, as it may signal potential opportunities in a recovering market.
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The LIBOR scandal, part 1: background

The Jolly Contrarian • 79 implied HN points • 08 Apr 24
💰 Finance Interest Rates Derivatives Risk management Banking
  1. Banks have structural interest rate risk, which they manage by borrowing at a low rate and lending at a high one.
  2. The LIBOR rate was created as a benchmark for banks to set their interest rates and trade standardized instruments.
  3. Interest rate swaps changed the game by allowing banks to trade interest rates with counterparties, impacting how they managed their structural interest rate risk.

About that ISDA Pt 3: The Preamble

The Jolly Contrarian • 59 implied HN points • 17 Feb 24
💼 Business Legal Contracts Derivatives Market
  1. A preamble in a legal document sets the scene and primes you for the contract, like a story's beginning. It's where important elements are hinted at before they become relevant.
  2. ISDA (International Swaps and Derivatives Association) has evolved from older versions like the 1992 ISDA to the more widely-used 2002 version, highlighting the slow adoption of new agreements in established industries.
  3. The ISDA Master Agreement includes important sections like the Schedule, which fine-tunes termination provisions and tax representations, and Transactions, which vary widely based on the type of swap being made.

Perpetual Swaps / Intro to Derivatives

DeFi Education • 639 implied HN points • 31 Oct 21
🔮 Crypto Derivatives Trading Finance Leverage Markets
  1. Derivatives are financial contracts that get their value from underlying assets, like futures and swaps. They help traders in risking less money for potentially larger rewards, but also come with increased risks.
  2. Perpetual swaps are a popular type of derivative in crypto because they allow traders to hold positions indefinitely. This means you can bet on price movements of cryptocurrencies without actually having to own them.
  3. Using futures allows for predictable costs and known risks, while perpetual swaps offer more flexibility but with variable costs. Traders can choose based on whether they prefer stability or flexibility in their trades.

Perpetual Protocol (Part 1 of 2)

DeFi Education • 559 implied HN points • 06 Nov 21
🔮 Crypto Blockchain Trading Derivatives Decentralization Finance
  1. Perpetual Protocol is a decentralized exchange where users can trade derivatives. This means you can buy and sell contracts that represent an underlying asset's value without owning the asset itself.
  2. Users can leverage their trades by up to 10 times. This allows traders to potentially make more money, but it also increases the risk of losing more.
  3. The protocol uses a specific token called PERP. This token is important for conducting trades and participating in the platform's governance.

The Economy In The West Is Backed by Hot Air

Oz’s Newsletter • 39 implied HN points • 17 Apr 23
💰 Finance Economy Derivatives Regulations Financialization AI Revolution
  1. The economy in the West is backed by imaginary assets like derivatives that can crash the economy if their true value is revealed.
  2. Banks create money out of thin air through loans backed by these imaginary assets, causing inflation and instability.
  3. The Anglosaxon-controlled Western economy must address its financial problems, regulate finance, and rebuild the economy on real-world connections to prepare for future challenges like AI and geopolitical shifts.

What immortal hand or eye: The Archegos affair, Part 1.

The Jolly Contrarian • 39 implied HN points • 23 Jul 22
💰 Finance Investment Risk management Regulation Banking Derivatives
  1. Family offices, even though seemingly benign, can engage in risky behavior that can have significant market impacts.
  2. Securities markets are complex environments where probabilistic risk management tools may fail, especially in extreme scenarios.
  3. Regulations requiring banks to pay out variation margins can inadvertently pour petrol on a fire during market volatility, leading to unintended consequences.

Corporate Hedging: The Down Side

Musings on Markets • 0 implied HN points • 27 Nov 08
💰 Finance Risk management Corporate Finance Investment Strategies Market Analysis Derivatives Risk management Investment strategy Derivatives Corporate Finance Market Analysis
  1. Not all risks should be hedged. Some risks can be passed on to investors who may want that exposure, like how oil companies shouldn't hedge oil prices.
  2. Companies should hedge against important risks that can greatly affect their operations, like insurance for physical damage or stabilizing fuel costs for airlines.
  3. Firms can also benefit from seeking out risks where they have an advantage. This can lead to success if they understand and exploit those risks well.

Buffett and Black-Scholes

Musings on Markets • 0 implied HN points • 01 Mar 11
💰 Finance Investing Options Valuation Models Academics Investing Market Analysis Valuation Risk management Derivatives
  1. Warren Buffett believes the Black-Scholes model gives bad values for long-term options, which is a viewpoint that some disagree with.
  2. Buffett's opinions on option valuation may not consider newer methods that adjust the Black-Scholes model for better accuracy.
  3. You can still be a successful investor without knowing how to value options, as long as you avoid investments that rely heavily on them.

About that ISDA: Pt 1: Three aims of an ISDA

The Jolly Contrarian • 0 implied HN points • 24 Jan 24
💼 Business Finance Legal Derivatives Contracts Risk management
  1. Understanding the ISDA Master Agreement is important for trading swaps and managing risks in the financial market.
  2. The ISDA Master Agreement serves as a relationship contract, a credit risk management tool, and a capital optimization tool for counterparties in derivative transactions.
  3. Over time, the ISDA has grown from a simple means of expediting trades to a complex bureaucratic process, but its core importance remains in facilitating OTC derivative transactions.

About that ISDA Pt 6(b): Section 2(a)(iii): the problems

The Jolly Contrarian • 0 implied HN points • 23 May 24
💰 Finance Derivatives Legal Risk Regulation Market
  1. Section 2(a)(iii) in the ISDA agreement is flawed and has caused confusion and litigation since 1987
  2. There are no specific triggers for Section 2(a)(iii) in ISDA, leading to uncertainty and challenges in determining when it is actually activated
  3. Section 2(a)(iii) may not be relevant in modern times due to changes in how swap exposures are managed, making the clause potentially unnecessary

Best of State of the Network in 2024

Coin Metrics' State of the Network • 0 implied HN points • 31 Dec 24
🔮 Crypto Bitcoin Ethereum Mining DeFi Stablecoins Derivatives
  1. Bitcoin saw significant changes this year, especially with the launch of spot bitcoin ETFs and a major halving event, which affected miner revenues and the overall ecosystem.
  2. Ethereum is evolving with its modular structure, increasing staking opportunities, and upgrades like Dencun, making transactions more scalable and efficient.
  3. The stablecoin market grew tremendously, with new players entering the space, while decentralized exchanges became essential for trading and providing liquidity in the crypto landscape.

Exploring Crypto Market Dynamics through Options Data

Coin Metrics' State of the Network • 0 implied HN points • 20 May 25
🔮 Crypto Market Analysis Derivatives Volatility Trading
  1. Options are becoming a key part of trading in crypto. They help traders manage risks, express their views on price changes, and understand market sentiment better.
  2. The use of Bitcoin options has surged significantly, showing that more people are getting involved in options trading. Most of the activity happens on the Deribit exchange, which is quite popular among traders.
  3. Market positioning through options shows a bullish outlook for Bitcoin, while Ethereum has a more mixed sentiment. This means traders are more confident about Bitcoin's future price than they are about Ethereum's direction.