Goldman (GS) Assumes Control of Large Options Portfolio from DBS
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Goldman Sachs (NYSE: GS) has taken over a rather large set of options contracts.
According to Bloomberg, Goldman was serving as a clearing firm for DBS Partners LP. Last week, Goldman asked banks and brokerages to submit offers to close out about 575,000 options.
How big is that number? About 4.3 percent of the 13.5 million S&P contracts outstanding as of Thursday. Unwinding the contracts would have cost about $470 million.
In an effort to get more collateral from DBS co-founder Eric Wojcikiewicz, the option portfolio was turned over instead.
One options analyst said Eric held on top positions bigger than most banks.
SEC rules allow clearing firms to assess risk which market-making clients like DBS have taken, and then ask for more capital or record a charge against their own capital to reflect the amount of risk. Basically, Goldman's on the hook for it all should the options go down.
Another unit of Goldman apparently submitted a bid for $457 million, meaning much of the deal will be worked out in house. Probably an easier situation for Goldman.
According to Bloomberg, Goldman was serving as a clearing firm for DBS Partners LP. Last week, Goldman asked banks and brokerages to submit offers to close out about 575,000 options.
How big is that number? About 4.3 percent of the 13.5 million S&P contracts outstanding as of Thursday. Unwinding the contracts would have cost about $470 million.
In an effort to get more collateral from DBS co-founder Eric Wojcikiewicz, the option portfolio was turned over instead.
One options analyst said Eric held on top positions bigger than most banks.
SEC rules allow clearing firms to assess risk which market-making clients like DBS have taken, and then ask for more capital or record a charge against their own capital to reflect the amount of risk. Basically, Goldman's on the hook for it all should the options go down.
Another unit of Goldman apparently submitted a bid for $457 million, meaning much of the deal will be worked out in house. Probably an easier situation for Goldman.
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