Wednesday, September 2, 2009

Continued Volatility in AIG

With AIG down another 6% pre-market, I thought I'd share an update regarding the volatility of AIG after the 100%+ jump we saw in August (hint... it's not letting up). First, as I detailed last month regarding the the volatility in AIG share price:
This type of volaility for AIG shouldn't be all that unexpected. After all, AIG is no ordinary stock. It is just a binary option on the continued bailing out of an entity currently too big too fail. At the end of the day, AIG should be worth $0.00 (i.e. nothing) or a high multiple of its current valuation.

The reason being it is a non-zero probability that the government will hand over billions more to equity investors via subsidized financing of their operations for years to come. How do you model that?


I'm curious if any readers are currently "betting" on the final (or temporary) direction?

Source: Yahoo Finance
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4 comments:

  1. AnonymousSeptember 2, 2009 at 6:15 AM

    well, it should give up August gains, that would be a start

    ReplyDelete
  2. JakeSeptember 2, 2009 at 6:16 AM

    but are you willing to put money on that with the possibility of a continued squeeze causing it to jump another 100%?

    ReplyDelete
  3. AnonymousSeptember 2, 2009 at 8:18 AM

    I own some wildly OTM puts with money that I was dying to lose. I figured this was a better use of it than drugs and booze. I think this is the only reasonable way(if there is one) to come within 100 ft. of playing this stock...

    ReplyDelete
  4. AnonymousSeptember 2, 2009 at 6:27 PM

    I am currently betting on AIG stock because it made considerable profit in Q2. I expect that AIG will survive in the end and the stock price will go up to over $100.

    ReplyDelete