Due to recent economic factors let this be a word to the wise:
Jim Sinclair's Commentary
What the OTC derivatives have not done to the international banking system, the mountain of upcoming slam-dunk litigation
will.
This is no joke because OTC derivatives are fraudulent in the legal sense.
In the practical sense OTC derivatives are worse because they are:
Without regulation.
Without listing on public exchanges.
Without standards.
Therefore not in the least bit
transparent.
Therefore without an open market of the bid/ask type.
Dealt in by private treaty negotiations.
Without
a clearinghouse.
Unfunded without financial guarantee of any kind.
Functioning as contracts of specific performance.
Financial character or ability to perform is totally dependent on the balance sheet of the loser in the arrangement.
Evaluated
by computer assumptions made by geek, non market experienced mathematicians who assume religiously that all markets return
to their normal relationships regardless of disruptions.
Now in the credit and default category alone considered by accepted
authorities as totaling more than USD$20 trillion in notional value.
Notional value becomes real value when the agreement
is forced to find a real market for ending the obligation which is how one says sell it.
Jim Sinclair's most excellent site :
http://www.jsmineset.com/
Trade OTC at your own risk level.
However, I consider the advantage of trading OTC.
1) When trading Spot / option trades, OTC can be done in the same account.
2) When trading Spot hedged with an Exchange traded option, one of the accounts will incur
a large loss.
MB trading currently provides spot forex (ECN) and exchange traded options. They have not answered
my query if I can trade both from the same account.
Interactive Brokers does carry both instruments, an initial deposit of $10,000 is required.
Interest positive trades may not be possible with some brokers.
3) OTC options can be daytraded.
I am currently leaning toward a "daytrade only" position on the OTC options.
