Bill Roper's Journal

I have a small cache of stock options that I got when Company B acquired Company A. When Company C acquired Company B, they got converted into Company C options.

The clock is now running out on those options. With perfect knowledge, I would have decided to cash them in before the market crash. Having failed my precog roll, I didn't manage that. The good news is that the options had a long enough fuse to get past the really ugly bottom -- $13.85 -- that the stock hit on March 9th.

Today, Company C shares closed at $18.68.

I already feel lucky. The question is how lucky I feel between now and April 16th when the options expire...

ObDisclaimer: Yes, I am a Company C employee. No, I have no idea what the share price is going to do, nor do I speak for the corporation in any way, shape, or form.

By way of The Volokh Conspiracy, here's the best explanation I've seen of how Wall Street managed to convince itself that the rules about systematic risk had been repealed.

Well, the Dow Jones has just dropped 10% across the last two days following the election. I heard the financial reporter on WBBM-AM this morning saying that it was because people thought that Obama would not be in office soon enough to implement his economic plan. Now, that's fascinating logic. I could equally easily say that it's because the markets recognize that Obama will soon be in office to implement his economic plan which has included things like raising the capital gains tax rate in the interest of fairness, regardless of its impact on government revenues. (That may or may not be part of his economic plan now, as these things are subject to change.)

But that would be equally specious reasoning. In the short run, it's not necessarily easy to figure out why the market is doing a particular thing, only that it is doing it and that it reflects some belief that the value of the shares traded is either higher or lower than it was before. And you need to recognize that there is a buyer and a seller in each of these transactions, so for everyone who is deciding to sell a share at a given price, there's someone else who is willing to buy it.
( So let's talk a bit about markets, risk, and return... )