When one of the leading equity derivative banks in the world, makes large losses in trading equity derivatives, it serves as a useful reminder that it is NOT easy to consistently make money trading. Furthermore , derivatives are like electricity – of great value when used to manage risk by corporations and institutions properly but one can get burned with them too. In general, they are not suitable for individual / retail use. One often sees advertisements of 95 percent trading success strategies (in Fx and in equities) using options. Steer away from gimmicky ads which proclaim “95 percent success” . Be wary of any program , model, person or group of people promising 95 percent trading success and marketing themselves online and more so with options based strategies … Ask yourself the question- if it were so easy, wouldn’t the biggest firms in the world with the most qualified traders be consistently making money using these approaches?
BNP Lowers Targets After Derivatives Loss Jolts Trading Arm
BNPParibas SA cut revenue and profitability targets after the French bank lost money in a fourth-quarter rout that saw stock trading earnings slump the most in at least six years.
France’s biggest lender is planning 600 million euros ($684 million) in additional cost cuts, focusing on the investment bank that Chief Executive Officer Jean-Laurent Bonnafe had targeted as a growth driver. Income from trading shrank 40 percent in the fourth quarter, led by the worst equities performance of the large investment banks reporting so far. The bank cited “extreme market movements at the end of the year,” weak client demand for structured products and a loss on index derivatives hedging as reasons behind the trading slump. The bank lost about $80 million in derivatives trades linked to the U.S. stock market late last year, people with knowledge of the matter said last month. It didn’t give more details on the loss during fourth-quarter results on Wednesday.
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