Never seen this talked about through google searches.
Anybody know how many call or puts we're talking about for Howard to loose 7 grand because of a .25 loss? I figured it to be around 27000 shares if we're talking shares but he had bought OPTIONS and they confuse me...
Does Bud really have to pay the SEVEN THOUSAND grand???
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Thanks!
I thought it was going by Bud's explanation to his father. "DK'd. Didn't know who I was when the options he bought took a bath."
Still can't believe he's on the line for that much money and accepting it. Ghadam!
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I remember watching this in 6th grade at home sick one day. All these years later it's become my favorite movie. Knowing all the terminology they speak. Like Chucky the woman slayer: "September 50s?? How bout those Decembers??! Great characters!
shareIf he had Howard's address, I make Howard's life missable to the point that it wouldn't be profitable to do business with my firm and then as Howard leaves, I put the word out about this guy and he would B blackballed were ever he goes. Sounds like Howard Stern?
IMDB as of late, sold out and became like City Data and about.com, worthless bureaucrats.
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one guy was looking to buy 50,000 contracts.
Howard the jerk has other options that you havent considered too.
Gordon Gekko is slandering him and his corporate reputation, thats Slander and is punishable in a court of law, also Gordons attack on him and his reputation is Defamation Of Character and that too holds up in a court of law, so if Gekko went after him he would go to the courts and file charges of Slander and Defamation against Gekko and a good lawyer would find some other things and use them to damage Gekkos name and reputation and create problems for Gekko.
So Howard the Jerk has options and they dont suck, Gekko would have been hit back by Howards lawyers.
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Some of the discussion here is a bit confusing.
As I remember the movie, what happened is that a client put in an order with Bud to buy some options, then "DKed" the order (i.e. said he never placed it) after it had already been executed. Because the market price of the options had dropped $7,000 since Bud executed the order, he had to eat the loss.
The price of options doesn't move in lockstep with the price of the underlying stock. If you want to get into detail, investors ordinarily value options with the Black-Scholes model. Values of options can change as a result of a changes that aren't particularly related to the underlying assets, such as, among other things, interest rates.
If a client wants to buy options, he can buy them through his stockbroker.
Buying options isn't inherently (or even usually) a way to take a position without any downside risk. Options can drop in price quite dramatically. Consider, for example, if someone were to buy call options on Stock X at $15 and then sit on them until their expiration, at which time Stock X's market price was $14. The options would be worthless, and the guy would have lost 100% of what he paid for the options.
I don't remember the dialog in enough detail to address the original poster's specific question. If the characters talked about the option dropping by 25 cents a contract, you could tell how many contracts he must've bought to produce a $7,000 loss (28,000). You don't know what the price per contract was, though. And if you're talking about the underlying stock dropping 25 cents a share (if that's what they said), the connection between that and a $7,000 decline in the value of some options is fairly mysterious.
Thanks for the great reply! I've come a long way in understanding derivatives. When the DOW was in decline recently (after the Malaysian airplane was shot down) I bought 100 VIX calls at I think $1.35 and sold them at $1.80 for a $4,500 profit. So yes if you have hundreds of contracts each five cent move can result in thousands of dollars....
You should only call 9-11 when you're out of beer.
-David Letterman
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The client claimed that Bud made a transaction contrary to the client's instructions. Bud said the client was wrong/lying. The sales manager (Bud's supervisor) chose to take the client's side.
As a result, the brokerage firm lost money, and the sales manager decided that Bud should be responsible for making up the loss.
I don't know if that's how such things work in reality. But today it's standard practice for brokerage firms to record phone conversations between brokers and clients, so that if there's a dispute, the facts can be checked.
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You got your mind right, Luke?
I'm confused too. I'm not a trader, but as I understood it Bud provided info about a particular option, but while providing info about the option didn't tell Howard to buy it, thus the quote "I didn't tell you to buy it, why would I tell you to sell it?"
Howard buys the options on his own, loses money but claims he Didn't Know (DK) who Bud was and was now trying to claim it was Bud who purchased the options without his consent? Which is a lie of course, but Bud's boss backs Howard.
????
It must come down to priorities for the company. Does Lynch think it's better for the company to back the customer or the employee. Since stockbrokers are a dime-a-dozen, and Howard the Jerk may be a lucrative client, it's better to make the customer happy. The trade-off is that's bad for employee moral, which can result in turnover for the company. Since there is not much skill at Bud's level, finding a replacement shouldn't be too hard.
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