close the markets?

[tulak]

I was thinking about this last night...is it possible that the government decides to close the markets for a period of time?

This has happened in the past, most recently 9/11. After 9/11, the markets were closed for about a week.

I'm sitting on a bunch of puts expiring 4/17 and 5/15. If the market were to close, beyond these dates (unlikely?), then I'm assuming that they would lose a ton of value? And what happens if the markets open post expiration? Would there be a chance to do anything with the options?

 

[MichaelB]

Here’s another thread asking the same question (but with a less title) https://www.early-retirement.org/forums/f55/dqotd-102635.html

 

[Montecfo]

I am not sure how closing the markets would help anything. It just limits access to funds and creates fear.

Treas Sec Mnuchen said markets will stay open. Of course all pronouncements subject to change.

 

[tulak]

Thanks Michael. I missed that thread.

 

[Chuckanut]

No. I do not believe that would be a good idea. It would only create more stress and uncertainty. We already have plenty of that given our tools for fighting this virus. People know we are relatively impotent. Why remind them again?

What we need is leadership that provides some reason to think these methods will work, that the suffering we will endure is worth it, and that the result will be a return to normal.

 

[unclemick]

Practicing semi isolation here. Plenty of toilet paper. Football season is over. The lust is slowly building.

Vanguard Total World Stock ETF lest I miss the bottom? 26th year of ER.
Talk me out of it. I need to stick with gardening and putzing with my hobby level solar panels.

heh heh heh - I have enough and I can't take it with me. But a few good stocks??

You think they might close the Market to keep me out of trouble? Don't think so.

 

[MRG]

After 9/11 the market did close. A portion of the decision was about fear over the systems that run the financial services industry. There was a fear they might be compromised. To the best of my knowledge there was no real evidence that occurred.

 

[Ready-4-ER-at-14]

To me the more interesting question is what happens to options if the market closes. If trading is halted on an option I believe you can still exercise options but say the market was closed for a week at what price?

 

[tulak]

^^^ Yes, I'm curious as to what would happen to existing options contracts. I wonder what happened after 9/11 for short-term options, ones that expired before the 9/17 opening.

Maybe somebody here knows? If not, I'm going to try and do some research on this later today.

I agree that the markets should stay open, but I could also see the logic from higher powers saying, hey, we know the economy is in the tanks, what if we hit the pause button until things blow over. I would think this would have to be in conjunction with dumping large amounts of money into people's bank accounts (or defer mortgage/rent payments, etc) to keep them afloat until this thing subsides. Which if Asia is an indicator, should be sometime in the next couple of months.

Lots of speculation on my part. I think the likelihood that this would happen is low, but not zero. And mostly I'm trying to figure out when I should bail on my puts. I'm willing to ride it out a bit longer, but if the markets closed, well, that would be a bummer.

 

[ckelly78z]

I think a quick recovery would be helped by banning short sales for a period of time...(not sure why anyone would hope for prices to go down anyway !).

 

[tulak]

Stopping shorts is a bad idea. Let the markets do their thing.

In my case, it’s worked as insurance. What I’m making in puts is helping offset the losses in my AA. And at this point, it was incredibly cheap insurance.

 

[MichaelB]

I think capital markets should remain open and unhampered. It is a place for risk capital.

Too much policy is directed toward markets. We need more policy directed toward the economy.

 

[pb4uski]

Stopping shorts is a bad idea. Let the markets do their thing. ...

I disagree. Why should anyone be able to sell an asset that they do not own?

We don't allow that any where else that I can think of other than stocks and bonds. Allowing short selling just converts investing into legalized betting.

P.S. If short selling were prohibited you could still have puts and calls... totally different thing and they have a legitimate purpose.

 

[UnrealizedPotential]

Stacey Cunningham, president of the NY stock exchange said on CNBC just moments ago the stock market would not be closed. She said right now it would not accomplish anything.

 

[ExFlyBoy5]

Stacey Cunningham, president of the NY stock exchange said on CNBC just moments ago the stock market would not be closed. She said right now it would not accomplish anything.

I saw that interview and her reasons were sound and made a great deal of sense.

 

[ugeauxgirl]

I was thinking about this last night...is it possible that the government decides to close the markets for a period of time?

This has happened in the past, most recently 9/11. After 9/11, the markets were closed for about a week.

I'm sitting on a bunch of puts expiring 4/17 and 5/15. If the market were to close, beyond these dates (unlikely?), then I'm assuming that they would lose a ton of value? And what happens if the markets open post expiration? Would there be a chance to do anything with the options?

I seem to remember that the phone lines to the trading floor were damaged and they couldn't open for trading until communication was re-established. It opened back up as soon as phones were up and running again.

 

[Jerry1]

I disagree. Why should anyone be able to sell an asset that they do not own?

We don't allow that any where else that I can think of other than stocks and bonds. Allowing short selling just converts investing into legalized betting.

P.S. If short selling were prohibited you could still have puts and calls... totally different thing and they have a legitimate purpose.

Don't merchants that use a drop shipping model essentially do this? Also, it seems like it would be possible for just about any commodity. The farmer sells the rights to his crop and someone buys that right. Then, what about a continual supply chain operation - like TP (to use a current topic ). Seems likely that the supplier would be selling all the time with the expectation that new stock is going to come in.

Not trying to argue, but it would seem odd if it was just stocks and bonds that have this characteristic. Doesn't seem likely.

 

[HadEnuff]

It seems to me that closing the markets, in the long run, reduces confidence. What if I need the money NOW!! and can't get access to it? It would inhibit my willingness to invest if I had a strong reason to believe that in a time of crisis I would be denied access to my funds.

Investing is risky.

 

[copyright1997reloaded]

After 9/11 the market did close. A portion of the decision was about fear over the systems that run the financial services industry. There was a fear they might be compromised. To the best of my knowledge there was no real evidence that occurred.

The NYSE closed because they were not fully electronic trading, and the financial district was a mess. I know, I was there on 9/11- two blocks away when the first tower collapsed. There was no power, and companies were running some systems on back up generators - facing the prospect of running out of diesel fuel as trucks weren't being allowed into lower Manhattan.

 

[copyright1997reloaded]

I think a quick recovery would be helped by banning short sales for a period of time...(not sure why anyone would hope for prices to go down anyway !).

People also short as a hedge to other holdings. It isn't a simple matter of "hope for prices to go down".

 

[pb4uski]

Don't merchants that use a drop shipping model essentially do this? Also, it seems like it would be possible for just about any commodity. The farmer sells the rights to his crop and someone buys that right. Then, what about a continual supply chain operation - like TP (to use a current topic ). Seems likely that the supplier would be selling all the time with the expectation that new stock is going to come in.

Not trying to argue, but it would seem odd if it was just stocks and bonds that have this characteristic. Doesn't seem likely.

Then name some legitimate examples. Drop shipping is a whole different thing... the drop shipper accepts the order and then simultaneously buys the product and sells it to their customer. With short sales, there is no simultaneous buy, just the sale with an IOU x shares.

Name me one other investment other than short sales where the investor makes money on failure. It seems to me that it would be a better world and economy if investors invested to benefit from success rather than failure and we prohibit short sales.

I don't have an issue with the sale of a legal right that is an intangible asset... like a contractual right that you own or even plants in the ground that you own... but selling a stock that you don't own or have any legal rights to doesn't fit there either.

 

[ERD50]

...

I don't have an issue with the sale of a legal right that is an intangible asset... like a contractual right that you own or even plants in the ground that you own... but selling a stock that you don't own or have any legal rights to doesn't fit there either.

I was going to mention grain futures (selling plants in the ground), a product (the resulting grain) you don't own (yet).

But in any case, short sellers do need to cover that sale with the amount required to buy it back. And short sellers buy back on dips, which could actually help to stabilize markets.

I dunno, but I kinda think making changes to the market in the middle of things would be disruptive. If short selling needs regulatory changes, then maybe wait until the dust settles?

-ERD50

 

[pb4uski]

I agree it would be best to wait... but the whole idea of short selling seems stupid to me... not investing but more wagering... we don't need it and it is counterproductive IMO. From a publicy policy perspective I think we would want to create economic incentive that reward success but not allow economi incentives that reward failure.

With grain futures you have an asset... your right to what the plant that you own produces.