By Conor Sen, Minyanville
Imagine you're the humble head of US equity trading at Morgan Stanley MS, minding your own business and trying to dodge bullets while Europe implodes and JPMorgan JPM gets dragged down by its CIO scandal.
Now imagine you're sitting at your desk Friday morning and learn that the Facebook FB IPO pricing isn't going as well as underwriters, led by your colleagues in investment banking, thought. You're called by a Very Important Person and ordered to buy every share of stock offered at $38. It appears that this happened. With 580 million shares trading hands on Friday, if you wound up buying just 5 million shares, that would be $190 million in risk on your books. How do you react?
You have two options:
Market News and Data brought to you by Benzinga APIs- Carry $190 million in Facebook risk home over the weekend, knowing that if you stop supporting the price on Monday and selling continues, or if Europe gets worse, the stock could fall significantly. If the stock opened on Monday at $33 you'd suffer a mark-to-market hit of $25 million.
- Figure out the best way to hedge your purchases, and do it before the close of business on Friday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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