[rekttrader]

The sec is not a supervisory agency, they’re a regulator meaning they step in after the fact for investor protections.

The sec had plenty of open sessions where folks in the industry would ask for guidance and yet it was not gotten because they don’t tell the capital or crypto markets what should be in the markets they’re here to pull down the things that shouldn’t be.

The sec allows “junk bonds” if you disclose the risk, the credit default swap maybe shouldn’t exist but it does... and is one of the most heavily traded securities.

Heck, you can buy VIX for CDS... let’s think about that for a second... that’s a mortgage, packed into a portfolio, that has a derivative, and that derivative’s volatility is tradeable.

That’s a FAAAAAAAAAAR more speculative asset than crypto and yet it still trades at higher volume than crypto does.

[arcticbull]

> That’s a FAAAAAAAAAAR more speculative asset than crypto and yet it still trades at higher volume than crypto does.

The difference is that most volume in crypto is fake, and the price is controlled by a small cartel of exchange owners and an $82B Bahamian counterfeiting operation whose 'bank' is run by the creator of Inspector Gadget. That's the risk that's not disclosed.

[robopsychology]

If the price is controlled why does it drop so much?

[piva00]

Those in the cartel need exit liquidity sometimes. It's manipulated, not 100% controlled.

[arcticbull]

If you're the house, then you profit when you know where it's going. The bigger the move, the more profit you can make.

[rurp]

While derivatives have certainly been abused and traded recklessly, they aren't inherently bad or reckless. In fact, the first order use for most is to reduce volatility as a hedging mechanism. Selling covered call options to reduce volatility or using a CDS to guard against default risk are normal things that happen all the time, they just don't make headlines because they are common and boring transactions.

Derivatives have uses and risks just like any other financial instrument and need to be well regulated, not demonized.

[mason55]

> Heck, you can buy VIX for CDS... let’s think about that for a second... that’s a mortgage, packed into a portfolio

Are you thinking MBS maybe? CDS is credit default swap, has nothing to do with mortgages

[jpgvm]

I think he means you can buy a volatility index on the market for CDSs for MBSs, it's a derivative of a derivative essentially.

In this case you would want to be long such a product when people become suddenly concerned about default risk of MBS but you yourself don't want to be long CDSs on those MBS.

A good reason for this could be you are worried that similar to 2008 going long CDSs could leave you subject to intolerable counter-party risk while the vendor offering the derivative could perhaps be more solvent in the case your VIX contracts pay out. Or it simply offers you more leverage, "jacked to the tits" in The Big Short parlence.

Very speculative regardless but that is just how higher order derivative products in finance are.

[nostrademons]

The way he described it, he's talking about CDS. "a mortgage, packed into a portfolio (MBS), that has a derivative (CDS), and that derivative’s volatility (VIX for CDS) is tradeable."

CDS is (usually) a derivative on MBS - it's a promise to pay out if a given MBS security defaults.