Tory Leadership Contest as a Trade
The UK had chosen a new Prime Minister, or rather, a party leader that conveniently became.
‘As a’ is a magical phrase you find between many different random technology domain entities. You put your ‘as a’ in between your ‘software service’ or you ‘platform service’ to make them SaaS and PaaS, and they instantly sounded smarter.
This ‘as a’ does not add any semantic values to the original phrase, your SaaS is still a software service. But it put emphasise on the latter part, the ‘service’ bit.
As me trying to come up with a marketing-y title for this blog, I slotted ‘as a’ in between the ‘Tory leadership contest’ and ‘trade’, to emphasise that I don’t intent to comment this contest at a political angel, rather an impartial technical one and try see it as a trade.
Johnson - the In the Money Option
Boris Johnson is the clear favoured candidate here. He is an ITM (In the Money) Option if you see it as a trade. With an ITM you are effectively short gamma and long theta, you are also short vol. To the uninitiated it roughly translated as change averse and can’t wait to see time pass. You want to hedge your tail risk, which, is reflected by how he purposely dodged the first TV debate (link). He’s team practically put him to a padding room and shield him away from public, at least at the beginning, where time to expiry is still large and you really don’t want to cock it up.
Where’s the Boris?
Hunt - the Out of the Money Option
Jeremy Hunt being the underdog here, he is the OTM (Out of the Money) Option. Symmetrically, he is long gamma, short theta and long vol. Knowing at any snapshot he would lose in the polls, Hunt wanted as much time as he could get and hope Johnson to trip himself over (short theta). He through all the toys he could get his hands on to stir up a big fuzz (long gamma). At the same time, Hunt would make sure Johnson’s hedges cost him as much as possible, by calling him a ‘coward’ for dodging the debates.
We all know how it all ended up. For once, the expected had happened, Johnson won the leadership contest and made his way into No 10. Nonetheless, the actions of the two candidates drew interesting parallel to what you would have manage them as your option trading portfolios.