CHAPTER EIGHT
Share and share alike – derivative inequity
In the 1990s, I found myself in equities. I had just followed the money flows – equity derivatives were now ‘hot’. As with structured products, traders were rushing into equities driven by the eternal promise of new riches. I quickly learned about derivative inequity.
I come from a bond background where you put up your money, you know what interest you get, and at the end you get your money back. With shares, the only similarity to this is that you put up the money. You have no guarantee that the company will pay you dividends or how much, if any; it’s all discretionary. You don’t get your money back, ever; if you want your money back you need to find another punter to buy the stock ...
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