European Stars And Stripes (Newspaper) - October 13, 1985, Darmstadt, Hesse                                Sunday october 13, 1985 the stars and stripes Page 19 " fmmiimimtmmnfjmt9ftmom&wemii Emma a mi.,m,\\ a Iii i Inmei Nitai i Iii Iii  aaa aria a Iii Money Market risky and complicated by James stkrngo1.d new York not playing the Dollar is not what it used to be. Like Many other niches of the International financial s Stem. The foreign Exchange Market has been transformed by the introduction of future and options products and the do cons of strategies they have spawned. Specially in the last weeks following the turbulence in the Market after a Deci Sion by major Industrial nations to Force the Dollar s value lower the new Strate gics have been put to Good use by sophisticated investors. Volume in the currency options and futures traded at the Phila Delphia Stock  and Chicago s International monetary Market soared after the meeting. But the multidimensional new currency contracts have also provided some sur Prises. Scott n. Dillman manager of cur Rency options trading at the Bank of America in new York explained there arc complications there that sneak up and can get you if you Don t understand the  a currency option is the right but not obligation to buy called a Call or sell called a put a set amount of a currency at a specified Price by some future Dale. One pays a Premium ranging generally from i percent to 5 percent of the value of the contract to open a contract. Buying a investor s guide japanese yen a ill or Selling a yen Pul would be a bet thai the yen will Rise against the Dollar. Hut there arc key differences Between those two approaches As currency options players found recently. The key to currency options Dillman said is that while they limit risk they respond to a number of variables each of which can move independently. The first variable is whal happens to the spot Exchange rate Between the Dollar and the foreign unit. The second is the volatility Factor. This is an expectation of How much the currency might swing on an annualized basis and helps determine the size of the Premium paid for the contract. The higher the volatility level the larger the Premium. Two less important variables involve the differential Between spot currency prices and Forward Market prices and the level of Short term interest rules. You can adjust the level of risk you have in the Market with some precision but you have to keep track of All the Varia Bles to really have control Dillman said. He provided the example of How a trader might have correctly predicted last month that the Dollar would fall sharply taken an options position based on this expectation but had a potentially huge profit trimmed significantly by not using the options Market carefully. On sept. 20. The Friday before a meet ing of Central Bankers from the United states great Britain France West Ger Many and Japan that was held on sept. ?.2, the Dollar traded at 2.91 German a irks on a spot basis. One Way to bet that the Dollar would fall would have been to set a put contract on the Mark. On sept. 20, a contract that expired on March 14, i a. At a rate of .1 Marks carried a Premium of 2.15 percent Dillman said. That Means that the trader would have sold a $1 million Pul for $23.500. Hoping to be Able to buy it Back later at a lower Price and pocket the difference. That Premium was based on a volatility Factor of 15 percent meaning that within the next year the Mark was expected to fluctuate no More than 15 percent either up or Down. By sept. 24, the Dollar had tumbled and the Mark had strengthened pushing the Dollar s Exchange rate Down to 2.72 Marks a 6.5 percent depreciation. That is All the gain a trader would have enjoyed if dollars had simply been sold for Marks. The results in the options Market were markedly different. First the Premium on the Pul option contract fell As it should have when the Mark strengthened. But by William Doyle q. I had my individual retirement account in a Mutual fund that asked share holders to Vole to change the fund from a corporation to a Massachusetts business Trust in order to reduce expenses. As i read the proxy solicitation this would mean the fund no longer would have to hold an annual shareholders meeting and might possibly even eliminate the annual report to shareholders. Along with these wonderful benefits we were informed that shareholders could become liable for the Trust s debts if it becomes insolvent. I voted against those management proposals. But they were approved by majority shareholder vote. Then i transferred my Ira elsewhere. I Don t want to bail out anybody with my sociable  May i have your comments on this a. I d say you went off the deep end with an Over reaction. No Mutual fund has become insolvent since the passage of the investment company act of 1940. The Basic Federal Law governing Mutual funds. The possibility of any Mutual fund going belly up is so Remote that it s unthinkable. A Mutual fund invests in Many different securities. The Market value of every Secu Rity a fund holds would have to fall to Zero before the fund becomes insolvent. That s just not going to happen. All Mutual funds set up in corporate form arc required to hold annual share holders meetings. A Mutual fund in Massachusetts business Trust form need not Convene an annual meeting unless its trustees judge it is necessary to hold that gathering. However the securities and Exchange commission must agree that no shareholder meeting is needed. No Mutual fund can eliminate its an Nual shareholders report. The 1940 act requires annual and semiannual reports. The Sec spells out what statistics and other information must be contained in those reports. Most Mutual funds Send out quarterly reports. The switch from corporate to Massachusetts business Trust form can reduce a Mutual fund s expenses. Those savings arc shared by All the fund s shareholders. Few shareholders attend annual meet Ings. Those meetings and the proxy solicitations that precede them consume big Dillman explained that the Dollar s sleep decline raised the volatility Factor built into the Mark currency option to i h 5 per cent from 15 percent. Had the volatility Factor remained at i 5 percent the Premium would have declined to 0.74 percent Dillman said. Thus the trader who sold the put for $23.500 would have been Able to buy in Back for $7.400 on tuesday and pocketed the $16.100 Dif Ference. But at the higher volatility level the Premium Only fell to 1.34 percent. Dillman said. Thus the trader had to pay $1.3.400 to buy Back the put option and the profit was reduced to $10.100. The Point is that the increase in volatility would have had the opposite and a beneficial Impact on the buyer of a Mark Call contract bringing additional gain on top of the Windfall from the Mark s sudden surge. You would have been sitting pretty by Selling the put but not As pretty As if you d bought a Call said John rout head of currency options trading at Donaldson  & Jan Rutle. You have to know Why you re picking your  Bucks also Massachusetts business trusts arc not required to Issue share certificates. Most Mutual fund shareholders never take Possession of their certificates anyway. But just the requirement that those engraved pieces of paper be available is highly expensive. Q. You have from time to Lime mentioned Wiesenberger investment company services and Tipper analytical services rankings of Mutual fund performances. I found the big Wiesenberger manual in a Large Public Library. However three such libraries in this area claim they can t locate the address for upper. They say they will subscribe if you will provide that address. Will you a. It won t do any Good. They can t buy it. The Tipper firm docs not sell its Mutual fund performance analysis to libraries. That excellent tabulation of the  and Downs in values of shares of More than 850 Mutual funds is sold Only to institutional investors such As Bank Trust departments Mutual fund management companies insurance companies pension funds and endowment funds. Al some colleges and universities whose endowment funds buy the Tipper service the Mutual fund publication ends up in the school libraries. If you have Access to such a Library look there. Q. I m not at All sure where a 75-year old couple such As my wife and i should invest. Our monthly fixed income is $4,000 for As Long As i live. We own properly valued at approximately $450,000 and owe no Money. We have about $5,000 in a municipal Bond Mutual fund currently yielding about 10.5 percent tax free. We occasionally put More Money into that fund. But the problem is it has been dropping in share value. Is this the Best investment for us a. No one can Ever Tell you what is the Best investment. Considering your in come you re in a High enough income tax bracket for that fund to be a Wise invest ment. Mutual fund share values Rise and fall. Unless that one Heads downhill for a Long time my advice is to stay with it. Kin0 in lure column lil Hoovle welcomes written Quail Ion Bui tie an provide Ani Weri Only through the column you can Orlle 10 him in care of the snarl and sir Lei Apo 09211. Us  hunks Seh Silver holdings with $1 billion in losses Dallas up the Hunt family whose aggressive acquisition of Silver in the Laic 1970s drove the Price from $10 an ounce to $50, has quietly sold 90 percent of its holdings in the last nine months at a $1 billion loss. Tom Whitaker a Hunt Energy corp. Vice president said about 90 percent of the 59 million ounces of Silver held by the Hunts has been disposed of this year through regular Market channels. Proceeds from the Sale were being used to pay Bank debts and fund certain Day to Day operations he said. For months investors had worried that the Hunts talc mils to divest their Silver holdings might cause the Price of the Metal to drop. G. Michael Boswell. President of Dallas based Sunshine mining co., said the slow sell off was done  the Hunt Brothers Nelson Bunker w. Herbert and Lamar began what was called the most disastrous speculation Epi Sode in . History in the late 1970s when they started accumulating their Silver hold Ings once valued at $10 billion. During the Hunt buying spree Silver prices climbed from below $10 an ounce to Stock pulse United Pitts International Civ rom 1915 for Lav october ii nose composite most Active by volume Slock div vol close earns be Yew Beatrce 3,796.600 41vi s 2 25 18.0 43 Ami 1,617,700 2- t.94 10.0 3.5 Western Art 1,585.900 7w 0.93 80 Pachco 1,514,600 i 3.67 to 1.1 War la 1.421,200 34vj 2.97 12.0 4.3 ism 1,350,100 12sh 10.06 12.0 35 could 1,239,700 34 1.70 19.0 2.0 prime cup 1,235.600 to 1.29 12.0 Soam 1,231,800 31v% 3.42 9.0 1,9 Nystel 1,729,300 is1/ 3.63 70 10.1 nose composite largest net changes Slock Cloit Choe earns be old Hll Lonh Mvi 3 /4 s 4.75 140 2.7 Grill Klill 59h 3vt 4.66 13.0 1? Cap com 192i i3 10.46 180 0.1 Holly Sug a 2 2 59 310 1.2 mall kor Mvi 4 2h 3.74 23.0 0.5 malice s6vj 2v4 s.4s 10.0 0.9 War la 3 " 2 2.97 12.0 4.3kldde 34h 2 3.77 9.0 3.5 fedral up 43 4-2 2.09 21.0 to chm s 2p 1 2.39 9.0 2.8 a Peak of $48 in january 1980. The commodity futures trading con. Mission charged Nelson and Herbert Hunt in february with manipulation of the Silver Market during 1979 and 1980. The complaint charges the Hunts recruited Arab european and South american financiers to participate in the plan to drive up Silver prices. The Hunts lost about is billion on the recent sales due to the prolonged and Sharp drop in Silver prices. In March 1980, the Hunts were unable to meet their commitments on Silver futures. The Federal Reserve Board arranged Bank Loans for the Hunts at the time to prevent a default that could have threat ened the entire . Financial system. Under the arrangement with the fed the Hunts were required to dispose of their Silver by 1990. W i Laker said the sales in the past nine months would help reduce the debt of the Hunt s Placid Oil co., which stood at $825 million a month ago. Much of the Oil com Pany s debt was incurred when the Brothers took Money from the company to buy Silver. The family still has control of about 6 million ounces of Silver. Amax com route Mott Active by volume Stock div oin Rhar tie con Flat wicket inn glib Home 0 Hasbro s Gulf cd Western dams vol close earn be Yew 873,400 t3w s i 53 90 1.4 626,100 4 i 494.400 31-. 064 6.0 3.1 295,500 4v 103 40 191.300 16 0.11 1500 10 106,900 161153,400 m -4 305 11.0 0.4 157.400 u l 3.6 Dolfl 134000 1 130.900 7v-j 30.7 amex composite largest Hal changes Stock close Choe earns be old Teion 212 20" s 0.19 1110 0.1 Marlin pros 541 17 139 39.0 Claros 37 2 a 4.12 9.0 2.2 anytime 1 2 to 15.0 14glen Oil 29 h 2.44 11.0 34 Lorimar 35t i1 405 9.0osuilvn s 224 1.49 15.0 19 Wath pot 108 1 790 140 0.9lvnchsvit i 10-1-1 1.53 70 Fluke John 22 s 1 253 9.0 be Price to earnings ratio Yew dividend omd def deficit St Yod in Stock earnings latest 17 months unaudited