Re: Stock Price hitting the skids
in response to
by
posted on
Dec 04, 2007 04:30PM
SSO on the TSX, SSRI on the NASDAQ
What does "To misuse terminology that has well-defined meaning and then excuse the misleading statement in such a manner strikes me as problemmatic at best." mean?
Yes, I understand the English. What bewilders me how this applies to the discussion we are having.
I think the operative word in this whole debate is "like".
As in: "SSO shares are like a never expiring option on the price of silver"
You can surely define the "price of SSO shares" and the "never expiring option" as carefully and correctly as you wish.
There probably are even clear points of difference - as you are maintaining.
The word "like", however is a relative term. How alike does it need to be to be "like"?
Any point of correspondence is sufficient to technically make the statement correct.
Two clear and obvious points of correspondence that the average investor would immediately pick out as the most significant seem to me to be an overwhelming endorsement of the correctness of the statement, any further dissimilarities notwithstanding.
What are those two points of correspondence?
a) Positive correlation of the value of the derivative with the value of the underlying item. As the underlying item goes up in value, the derivative value goes up, and as the underlying item goes down in value, the derivative value goes down also.
b) Leverage (at least in general) of the derivative over the underlying item. Just because the leverage factor varies somewhat over the range would not seem to be terribly significant to the average investor (as opposed to the mathematician)
Since the statment is aimed at the average investor visiting the website, I fail to see any basis for complaint about it.
The statement is not: "SSO shares are exactly the same as a never expiring option on the price of silver"
If that was the statement in question, I would support your contention.