Monday, January 5, 2009
Leon Metzger, Columbia University & NYU hedge fund professor gives and explanation of how Bernoe Madoff could have offered remarkably consistent returns for years and years and then all of a sudden blow up: sell uncovered calls.
Anyone with a beginners knowledge of options and how they work will understand the risk profile that the professor is attempting to explain to the typically obtuse CNBC host. Again and again the CNBC hosts try to whip up this sexy idea of "fraud" or "blame" while the professor tries to offer a reasonable explanation.
Maybe Maddoff was selling puts given that this market was tanking or he was sell calls on inverse ETFs like the SMN, QID or SDS.
On a side note, what is up with Becky Quick's hair? it's in really bad shape.