[NativeNewYorker]

JPM is a highly liquid stock, with highly liquid options and has a great deal of debt outstanding.

There is ample opportunity to attempt to profit by shorting/buying puts on JPM instruments.

[gcruse]

Derivatives may have higher risk....and produce higher return. At least with buying stock and holding it, the most you can lose is the value of the stock when you bought it. But something as simple as selling short can leave you with unlimited losses. For that matter, anyone brave enough to play the commodities without actually being a floor trader, needs the political wherewithal of a Hillary Clinton to keep from having to bail out when prices drop, because you can't afford to weather the storm, even though if you could, you would win. All this is to say that there are no bad derivatives, just hubristic fools with more money than brains.

[Rodney King]

I didn't have the patience to read the whole article, but it is impossible to assess the risk of these positions without knowing what they are.

The vast majority of derivatives are used in risk arbitrage, and many of the derivatives positions offset one another.

[David]

It may not be quite that bad. In fact the total net notional exposure might well be a manageable number because they may be on both sides of the bet in different places. On the other hand, I assume the numbers to demonstrate where their real exposure is are not available.

[cactmh]

We just did a case study on the Metallgesellschaft AG debacle. Management screwed up big time. Had they waited it out, they would've done ok. (it was a big cash drain)

[FreedomFarmer]

A rather good article. I suspect it was meant to be a not so subtle warning that the gold derivative game is coming apart at the seams, because of the GATA lawsuit, and the number of burnt investers looking into all the price manipulation information popping out of embarassing places.
Going to have to check into this Zeal website. Maybe gold really will shoot to $30,000 an ounce, as soon as the paper burns.

[habs4ever]

You didn't mention whether JPM is acting as agent or principal in most of its transactions. While off balance sheet finance can seem risky, what with various swaps and the like with differing maturities, it isn't the bank that accepts the risk, its another party.Over the counter options are also very liquid, and banks rarely allow open postions simply because they want to keep their books flat.Do you know much about the trading culture? I ask because this is my field, and very few firms actually risk that much capital, as they tend to hedge and capture the vig.Turnover it the game for them, as they aren't position traders at all.