Commercial imperative: Difference between revisions

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 Why are you [[short an option]]? Because ''you are not entitled to Future X''. You have to persuade your client to give it to you. You cannot stop it terminating your {{t|contract}} if it so wishes. It could give all that lovely, juicy Future X to someone else. ''You should apply every fibre of your being to giving your client no earthly reason to take its business elsewhere''. In a very real sense, your future prospects depend on the continued performance of your valuable contracts.<ref>Just what to do about [[stale contract]]s, and where the parties have fallen out of affection for each other, is a subject for another article, but in a nutshell, ''shut them down''. They are the tail end of the 80 in your [[80:20 rule|80:20]] rule.</ref>
-===Dick moves===
+===[[Dick move]]s===
-Now, in the course of your relationship with your client, you may, if the fancy takes you, indulge in what we might call “dick moves”.<ref>In fairness, your client might, too. Especially if it is a [[hedge fund]]. [[Hedge fund]]s are full of people who make dick moves, kind of as their business model.</ref> For example, you might seek to exploit the literal wording of a {{t|contract}} notwithstanding that you both know your commercial intention in entering it was something else.
+Now, during your relationship, you may, if the fancy takes you, indulge in what we might call “dick moves”.<ref>In fairness, your client might, too. Especially if it is a [[hedge fund]]. [[Hedge fund]]s are full of people who make dick moves, kind of as their business model.</ref> You might seek to exploit the literal wording of a {{t|contract}} even though you both know your commercial intention in entering it was something else.
 There are (at least) two kinds of dick moves:
-*'''Mistrades''': those that arise from a misconception between the parties: your expectation and your client’s about the commercial intention were different. Cheapest to deliver options in credit derivatives are this kind of dick move. Your client sees a Triple A rating eligibility criteria, and sees in it impeachable credit. You look at it and see an opportunity to dump the crappiest, most poorly risked, implausibly rated Triple A bond that you can find.<ref>Once upon a time there were plenty. They all wound up in CDO<sup>3</sup> deals.</ref>
+*'''Mistrades''': [[Dick move]]s that arise from a misconception between the parties: your expectation and your client’s about the commercial intention were different. [[Cheapest to deliver]] options in [[credit derivatives]] are this kind of [[dick move]]. Your client sees a Triple A [[Ratings notches|rating]] eligibility criteria, and sees in it impeachable credit. You look at it and see an opportunity to dump the crappiest, most poorly risked, implausibly rated AAA bond that you can find.<ref>Once upon a time there were plenty. They all wound up in CDO<sup>3</sup> deals.</ref>
-*'''“Tent-peg” mistrades''': A broker servicing its client is somewhat [[short an option]], too, and as a consequence will tend to write in ''ostensibly'' outrageous legal protections into its legal contracts by way of defensive strategy.
+*'''“Tent-peg” mistrades''': A [[broker]] servicing its client is somewhat [[short an option]] — the one that arises because ''the client is always right'' — and as a consequence will  write in ''ostensibly'' outrageous legal protections, which it never intends to use, by way of defensive strategy to spike the client’s temptation to take advantage of its supiune broker.
 ===Legal risk===
 At the start of your relationship, the value of the three types of X will be unknown. It is at this point that you, your counterparty, and your respective battalions of [[lawyers]] will engage in that unedifying ritual known as contract [[negotiation]]. Counsel will agonise four weeks on the potential import of the legal terms. “Does ''[[under]]'' really mean the same thing as ''[[In accordance with|pursuant to and in accordance with]]''?”  This kind of thing. Most of the arguments will concern circumstances which are almost certain never to occur and, if they do, Will necessarily be utterly destructive of Future X in any case. The [[insolvency]] of the parties, for example. It is all very tedious, but those of a certain disposition seem to enjoy it. We write about them a lot on this site.