Philip M Halperin - Scribblings

The Short Put - A Fable


nce upon a time in the City, a lonely Risk Manager sat upon his high top stool, pondering a missing Source of Risk. The lamplighters had already banked the streetlights which cast an eerie pallor over the myriad cigarette ends that littered the entrance to his financial institution's Non-Smoking Building. The legion of risk-controllers and traders had already adjourned to the noted watering-holes of Soho amid the pursuit of vicarious aesthetic stimulation, yet there remained a Risk Yet Unidentified in the curious result before him. For, in the latest Simulation, it appeared that there was an additional Short Put which, although it affected the Overall Book, was not immediately identifiable as belonging to any particular Risk Centre. Suddenly there came a knocking on his glass door; as the wary Risk Manager opened the portal, he was greeted by an Unearthly Apparition. He immediately queried the Poltergeist as to its identity:

"And who might you be?"

"I am a Short Put," replied the apparition.

"Thank God I have finally discovered you," ejaculated the Risk Manager, "for I have seen your effect yet could not determine to which Book you belong."

"Actually," replied the Short Put,"I belong to you. Did you not notice that my premium was equal to your salary?"

"Well," countered the Risk Manager, "be that as it may, you seem very large to have been sold for such a trifling amount. Pray tell, what is your exercise price?"

The Short Put giggled,"The exercise price equals the P/L of another over whom you have no control..."

"I do not find that the least bit humourous," objected the Risk Manager, "particularly as I do not as yet know the underlying commodity."

"Of all the things about me, that should be the most obvious," declared the Short Put, "The underlying is Your Job."

Copyleft. This Illustrative Fable should be Intuitively Obvious.