I don't understand options. I'm looking at the for Lehman Brothers right now. The underlying stock was trading at 16.17 at close on Friday.

The option chain for puts expiring September 8 looks like:

Option Symbol

My first problem with this is the symbols. They are supposedly formed something like: optionSymbol = "+" + stockSymbol + monthCode + strikePriceCode

So, let's decipher "+LYHUM." The stock symbol is "LYH." The month code is "U." The strikeprice code is "M."

Of course, the actual symbol for Lehman Brother on the NYSE is "LEH." Part of the problem is that NASDAQ ticker symbols are all four characters, while options symbols have three for the stock, so each NASDAQ symbol must lose a character. Of course, this doesn't explain why the venerable Lehman Brothers didn't get to have "LEH."

"U" means this is a put expiring in September. While this doesn't make a lot of sense, at least the convention is consistent across options symbols.

"M" is the code for the strike price. It happens to mean 19. This is based on what the price of the underlying stock was when the option was created. Of course, there are only 26 letters, and for very volatile stocks you run out of letters. This is why some option have multiple stock symbols mapping back to the same underlying stock symbol. For instance, options on the terrifyingly volatile Ambac financial group (NYSE:ABK) start with "GIY," "YZL" or "ABK."

For more on this awful naming convention, which is apparently going away next year, wikipedia may be enlightening:

http://en.wikipedia.org/wiki/Option_symbol
http://en.wikipedia.org/wiki/Option_naming_convention

Pricing

The bid and ask prices shown above are for 1 share. However, an option contract is actually for 100 shares. So, while I can't buy anything for $3.8, I can buy +LYHUM for $380 (plus miscellenaous fees). Owning one contract of +LYHUM entitles me to sell 100 shares of Lehman for $19 a share ($19*100=$1900 in total).

Because this is an American option, I can exercise it (make that sale described above) at any time before the expiration date. If it were a European option, I could only sell it on the expiration date. If it were an Asian option, I could only sell on the expiration date, subject to something about the average price over the life of the option.

Say I buy +LYHUM for the current asking price. This costs me $380. The current stock price is below the stike price, so I can exercise the option. That is, I buy 100 shares of Lehman Brothers for $16.17 each: $16.17*100=$1617. I then sell 100 shares of Lehman to someone for $19 each: $19*100=$1900. So, I've made $1900-$1617=$283 from exercising the option. Of course, the option cost me $380. So, I've lost: $380-$283=$97 from this little endevour.

So, now my question is: why on earth would I want to buy this option? That's more or less answered in the little graph I made, shown below:

Of course, this ignores all the complexities about the time value of money, but I'm still struggling with basics here. Basically, by buying a put for $380, you are expressing with certainty that the price of Lehman will dip below $15 before the thing expires on September 8th.

Going Forward

It looks like I can grab options data from Yahoo. Of course, historical data is unavailable, but the current day might be useful anyway.

Ideally, I'd like to model the option directly, as if were just an extremely volatile stock. A couple advantages to this:

(1) It's fairly odd, and not the prefered way of doing things.
(2) I wouldn't have to change anything I already have.

But, to do that I would need historic open, high, low, close data. It looks like I can buy that for a couple hundred dollars, but I would really need a server for that to be a viable approach.

So, I suppose I take the other approach: model the underlying stock, then pick options which are well priced according to my odd notion of volatility. This is going to be a pain though, because it involves a major rewrite. I also don't like it because I'm going to end up with something pretty close to Black-Scholes, which everyone is already using to value their options.

I finally got a new tire for the Bianchi. I think it's 7 since I got here. Assuming an average cost of £30 (I've been buying increasingly shitty ones) that's £210=$420 I've wasted because the English can't be bothered to pick up their garbage, but prefer to throw it in the street.

Ok, fine, whatever.

I go to Foyle’s, buy an awful book by Lionel Shriver, who says she's not a feminist because they're humorless, but manages quite well to be humorless anyway. I'm reading it because a book club I probably shouldn't go to is. That's my excuse, what's yours?

Anyway.

I go get a cup of tea, and am very proud of myself because I'm assimilating so well, drinking tea instead of coffee... and I sit there, hating this book in the lovely, very un-English sunshine. And I go to my bike, which has been sitting on one of the busiest, most foot traffic rich streets in Soho, in the middle of fucking London, on a Saturday afternoon... and my seatpost and seat are gone. Fuck.

Aside: In the states this never would have happened. Here people are afraid to stop thieves, especially if they're children. Children you see, "don't understand right and wrong." As a result they routinely stab people (which is probably what my stolen Global knife is being used for, but that's another story), and throw acid at people. As much as I hate to agree with the NRA, banning guns has done nothing for this country. The problems are social and have little to do with the weapons people use.

So, I walk to the nearest bike shop, which is at least a mile (ever tried riding a track bike without a seat? I don't suggest it.) And, knowing full well what's in store, I ask how much a new Thomson seatpost is going to be. £77.95.

"I can't really condone paying twice as much for this seatpost."

"That exchange rate, eh?"

...And instead of explaining that international trade isn't supposed to be substituting "£" for "$" signs, elaborating that the seatposts are made in fucking Macon Georgia, in the good old US of A, and as such should cost £35 pounds, since Excel has them for $70 and the exchange rate is 1 to 2, not 1 to 1, and the arguable privilege of living in London shouldn’t mean everything costs twice as much as in New York... no, I just walk off. See, see, I'm good. I don't argue with the stupid Brits.

So, I walk the subsequent mile home. And then I got cake and coffee at the Spanish place where the service is good, the waiters are friendly and it’s like I’m in another country.

Oh, and in the background there... my washing machine. Washing machine. Not a fucking washer dryer like the lying landlord said. As a result, my kitchen is now covered in damp clothing. After much bitching, he's supposedly going to get me a dryer (which won't fit in the studio) or if I'm really really lucky a washer dryer. But, he doesn't have to. It'd be a favor. Since it's not like he told me it's a fucking washer dryer.

I hate the inefficency. I hate the apathy. I hate people who are bad at what they do.

I tried to do something clever. First I was thinking I'd attach the motherboards to plywood, but Collin's experience said that was not so thrilling an idea. I tried to skewer them like little kebabs over my fan, but the contraption I built from bar stock and threaded rod would have fallen on the fan and been devoured.

Then I tried the Gulliver's travels approach: a thousand pieces of string holding the motherboards to the surface of the fan... but the motherboards started buckling under their load... so I went out and bought some cases... cheating, I know.

My power supplies glow blue Star Wars.

Biologists note that competition for food results in a stable evolutionary equilibrium characterized by multiple strategies. When competitors meet at a food site, they can either fight over the prize and risk injury – the "hawk" strategy – or withdraw and lose the food – the "dove" strategy. If every individual fights, a mutant who withdraws would eventually have a greater probability of procreating than the average fighter because of the risk of injury and the fact that only one fighter can win. (The dove occasionally finds uncontested food.) On the other hand, if every individual followed the dove strategy, a single fighter would gain a lot of food. The evolutionary equilibrium can be shown to involve either (a) part of the population always follows the hawk strategy and the complementary part follows the dove strategy or (b) every individual follows a randomized strategy, sometimes behaving as a hawk and sometimes as a dove. We can definitely rule out a world in which everyone follows the same fixed strategy.

The analogy to market efficiency is immediate: investors compete for the most "undervalued" asset. The hawk strategy is conducting security analysis. The dove strategy is passive investing: expending no effort on information analysis. Clearly, if everyone analyses securities, the benefits will be less than the costs. If everyone is passive, the benefits of analysis will be tremendous. The equilibrium is that some analyze, some don’t. Does it sound familiar? Note that the final equilibrium is characterized by a situation in which it is not worthwhile for the marginal passive investor to begin analyzing nor for the marginal active investor to cease conducting security analysis.

Something very odd has been happening with requests. BLF has been getting a ton recently. It appears to be crippling the server. When I request nonplatonic from the UK, it often times out. I have no idea what to do about this.

...this one has a fireplace.

#!/usr/bin/env python

import sys, gtk

sys.path.append("/opt/tuxdroid/api/python")
from tux import *

tux.daemon.connect()
tux.tts.connect()

tux.cmd.wings_on(4)
tux.cmd.mouth_open()
tux.tts.speak("Hello World!")
tux.cmd.mouth_close()

tux.destroy()

Wearing:
A shirt from before I knew you
A sport coat I bought to impress you
A sweater from middle school
I'm listening to a quartet and remembering a countryclub

I say this in the hope that it will be properly indexed by the great and mighty google, so that my voice may be heard: Jamie Oliver's Fifteen in London is a piece of shit. Keep in mind this has nothing to do with the food... because I didn't get to try the food. Fifteen has a nice bar, where I foolishly thought I might be able to get a meal. The hostess was in on this delusion as well.

The manager, however, arbiter of all things great and managerial, knew better. He said, "if we served you a meal at the bar, then we would have to serve everyone meals at the bar." And this made me feel strangely guilty, as if I had done something wrong by sitting at the bar with a menu in front of me. It also left me feeling that sense of injustice I remember from middle school, compelling me to ask "and what would be wrong with that?" Admittedly, I was allowed to order primi at the bar, but only primi... and the only thing that looked even vaguely good on there was the gnocchi, but my roommate had the gnocchi and says it's crap... so I wasn't about to try that. I wanted the calf's liver, or maybe the polenta, both firmly ensconced in the secondi section... and, as such, not bar food.

Good restaurants serve food at the bar. There are numerous examples, some vastly better that what Fifteen could possibly be: Frasca, Masa, Bouchon and Le Pichet. I know of no counterexamples, while some of the best meals of my life were had at the Frasca bar.

All these are unnecessary complications. The point here is simple. The manager is an ass. His job, as near as I can tell, is to make sure customers are happy... instead he's made me quite angry. Though, I suppose you might argue that since I was unable to order any food, I am, in a strict sense, not a customer. But, I would have liked to have been. And now, rather that having created a potentially happy follower of the Jamie Oliver cause, I am instead a pissed off enemy who will continue to mock Jamie Oliver's Food Network origins, since this isn't a restaurant about food, but about its pedantic social agenda.

To summarize:
(1) The manager should be fired or severely beaten with a spatula, possibly both.
(2) Serve food at the bar.

The Borg-Yahoo merger won't work. Here's why. It's like taking the two guys who finished second and third in a 100-yard dash and tying their legs together and asking for a rematch, believing that now they'll run faster.

Dear Interwebs,

I would like to learn of a topic that offends no one. Any suggestions?

Playing piano on top of a mountain...

http://www.csmonitor.com/2008/0117/p20s01-woeu.html#
http://www.andsnes.com/

A great battle has been won in The War on Terror, this morning in Newark Airport. A small girl, traveling with her mother and sisters was successfully harassed for a good five minutes by a brave and industrious agent of the TSA.

The girl was attempting to smuggle a small snow globe onto the plane unmolested. Thanks to the efforts of the TSA, however, she was bothered for a good five minutes before being told to check her snow globe next time. She, bothered, annoyed and feeling strange guilt for something, was then ushered through out of security where she was allowed to wish she were somewhere else.

1 Harry Potter
2 The Bible
3 1984
4 Catcher In The Rye
5 Angels And Demons

My sunlight is going away.
The view from my living room:
(Also, I want the six legged majority to live somewhere else)
Vive Londres!

it's a tragedy,
completely undeserved.
call your senator.