Capital Ship Etiquette

The captain goes down with the ship” is an idiom and maritime tradition that a sea captain holds ultimate responsibility for both his ship and everyone embarked on it, and he will die trying to save either of them. Although often associated with the sinking of the RMS Titanic in 1912 and its captain, Edward J. Smith, the phrase predates the Titanic by at least 11 years.[1] In most instances the captain of the ship forgoes his own rapid departure of a ship in distress, and concentrates instead on saving other people. It often results in either the death or belated rescue of the captain as the last person on board.
// // // //

History

// // // //

The concept is closely related to another protocol from the nineteenth century, “women and children first.” Both reflect the Victorian ideal of chivalry in which the upper classes were expected to emulate a morality tied to sacred honour, service, and respect for the disadvantaged. The actions of the captain and men during the sinking of HMS Birkenhead in 1852 prompted praise from many due to the sacrifice of the men who saved the women and children by evacuating them first. Rudyard Kipling‘s poem “Soldier an’ Sailor Too” and Samuel SmilesSelf-Help both highlighted the valour of the men who stood at attention and played in the band as their ship was sinking.

// // // //

Social and legal responsibility

The idiom literally means that a captain will be the last person to leave a ship alive prior to its sinking or utter destruction, and if unable to evacuate the crew and passengers, the captain will not evacuate himself.[2] In a social context, especially as a mariner, the captain will feel compelled to take this responsibility as a type of social norm. Shirking this responsibility in a crisis would go against societal mores because of the offender’s lack of ethics.

In maritime law the responsibility of the ship’s master for his ship is paramount no matter what its condition, so abandoning a ship has legal consequences, including the nature of salvage rights. So even if a captain abandons his ship in distress, he is generally responsible for it in his absence and would be compelled to return to the ship until danger to the vessel has relented. If a naval captain evacuates a vessel in wartime, it may be considered a capital offence similar to desertion unless he subsequently returns to the ship at his first opportunity to prevent its capture and rescue the crew.

Abandoning a ship in distress may be considered a crime that can lead to imprisonment.[2] Captain Francesco Schettino, who left his ship in the midst of the Costa Concordia disaster, was not only widely reviled for his actions, but was arrested by Italian authorities on criminal charges.[3] Abandoning ship is a maritime crime that has been on the books for centuries in Spain, Greece and Italy.[4] South Korean law may also require the captain to rescue himself last.[5] In Finland the Maritime Law (Merilaki) states that the captain must do everything in his power to save everyone on board the ship in distress and that unless his life is in immediate danger, he shall not leave the vessel as long as there is reasonable hope that it can be saved.[6] In the United States, abandoning the ship is not explicitly illegal, but the captain could be charged with other crimes, such as manslaughter, which encompass common law precedent passed down through centuries. It is not illegal under international maritime law.

Long Put

The investor buys a put contract that is compatible with the expected timing and size of a downturn. Although a put usually doesn’t appreciate $1 for every $1 that the stock declines, the percentage gains can be significant. the put holder is willing to forfeit 100% of the premium paid and is convinced a decline is imminent, one choice is to wait until the last trading day. If the stock falls, the put might generate a nice profit after all. However, if a quick correction looks unlikely, it might make sense to sell the put while it still has some time value. A timely decision might recover part or even all of the investment.

Outlook

The investor is looking for a sharp decline in the stock’s price during the life of the option.

This strategy is compatible with a variety of long-term forecasts for the underlying stock, from very bearish to neutral. However, if the investor is firmly bullish on the underlying stock in the long run, other strategy alternatives might be more suitable.

Summary

This strategy consists of buying puts as a means to profit if the stock price moves lower. It is a candidate for bearish investors who want to participate in an anticipated downturn, but without the risk and inconveniences of selling the stock short.

The time horizon is limited to the life of the option.

Motivation

A put buyer has the opportunity to profit from a fall in the stock’s price, without risking an unlimited amount of capital, as a short stock seller does. What’s more, the leverage involved in a long put strategy can generate attractive percentage returns if the forecast is right.

Another common use for puts is hedging a long stock position. It is described separately under protective put.

Variations

These remarks are targeted toward the investor who buys puts as a standalone strategy. See the discussion on protective puts for a discussion on using long puts as a way to hedge or exit a long stock position.

Max Loss

The maximum loss is limited. The worst that can happen is for the stock price to be above the strike price at expiration with the put owner still holding the position. The put option expires worthless and the loss is the price paid for the put.

Max Gain

The profit potential is limited but substantial. The best that can happen is for the stock to become worthless. In that case, the investor can theoretically do one of two things: sell the put for its intrinsic value or exercise the put to sell the underlying stock at the strike price and simultaneously buy the equivalent amount of shares in the market at, theoretically, zero cost. The investor’s profit would be the difference between the strike price and zero, less the premium paid, commissions and fees.

Profit/Loss

The profit potential is significant, and the losses are limited to the premium paid.

Although a put option is unlikely to appreciate $1 for every $1 that the stock declines during most of the option’s life, the gains could be substantial if the stock falls sharply. Generally speaking, the earlier and more dramatic the drop in the stock’s value, the better for the long put strategy. Given that the premium investment can be small relative to the stock value it represents, the potential percentage gains and losses can be large, with the caveat that they must be realized by the time the option expires.

All other things being equal, an option typically loses time value premium with every passing day, and the rate of time value erosion tends to accelerate. That means the long put holder may not be able to re-sell the option at a profit unless at least one major pricing factor changes favorably. The most obvious would be an decline in the underlying stock’s price. A rise in volatility could also help significantly by boosting the put’s time value.

An option holder cannot lose more than the initial price paid for the option.

Breakeven

At expiration, the strategy breaks even if the stock price equals the strike price minus the cost of the option. Any stock price below that level produces a net profit. In other words:

Breakeven = strike – premium

Volatility

An increase in implied volatility would have a positive impact on this strategy, all other things being equal. Volatility tends to boost the value of any long option strategy, because it indicates a greater mathematical probability that the stock will move enough to give the option intrinsic value (or add to its current intrinsic value) by expiration day.

By the same logic, a decline in volatility has a tendency to lower the long put strategy’s value, regardless of the overall stock price trend.

Time Decay

As with most long option strategies, the passage of time has a negative impact, all other things being equal. As time remaining until expiration disappears, the statistical chances of achieving further gains shrink. That tends to be reflected in eroding time premiums, which put downward pressure on the put’s market value.

Once time value disappears, all that remains is intrinsic value. For in-the-money options, that is the difference between the going stock price and the strike price. For at-the-money and out-of-the-money options, intrinsic value is zero.

Assignment Risk

None. The investor is in control.

Expiration Risk

Slight. If the option is in-the-money at expiration, it may be exercised on your behalf by your brokerage firm. Since this investor did not own the underlying stock, an unexpected exercise could require urgent measures to find the stock for delivery at settlement. A short stock position might be a problematic outcome for an individual investor.

Every investor carrying a long option position into expiration is urged to verify all related procedures with their brokerage firm: automatic exercise minimums, exercise notification deadlines, etc.

Comments

All option investors have reason to monitor the underlying stock and keep track of dividends. This applies to long put investors, too.

On an ex-dividend date, the amount of the dividend is deducted from the value of the underlying stock. Assuming nothing else has changed, a lower stock value typically boosts the put option’s value. The effect is foreseeable and usually gets factored more gradually, but dividend dates could nevertheless be one consideration in deciding when it might be optimal to close out the put position.

Exercising a put would result in the sale of the underlying stock. These comments focus on long puts as a standalone strategy, so exercising the option would result in a short stock position, something not all individuals would choose as a goal. The plan here is to resell the put at a profit before expiration. The investor is hoping for a dramatic downturn; the sooner, the better.

Timing is of the essence. Some put holders set price targets or re-evaluation dates; others ‘play it by ear.’ Either way, all value must be realized before the put expires. If the expected results have not materialized as expiration draws near, a careful investor is ready to re-evaluate.

Long Put

Net Position (at expiration)

EXAMPLE

Long 1 XYZ 60 put

MAXIMUM GAIN

Strike price – premium paid

MAXIMUM LOSS

Premium paid

Source:  www.optionseducation.org Read more

The Key to Every Successful Business is Agility Christopher Worley Contributor Professor of Strategy at NEOMA University France – Dec 11 2014.

With most economic indicators suggesting that the Great Recession is coming to an end, it’s tempting for a business that has successfully weathered the storm to breathe a sigh of relief and look forward to business as usual. But experience tells us that complacency is the worst mistake a business — especially a startup — can make.

Just ask Digital Equipment Corporation (DEC), the precursor to Microsoft and Apple and creator of the minicomputer. By 1990, DEC was riding high, ranked only behind IBM in the computer industry. But under the leadership of Ken Olsen — who once famously derided the emerging personal computer, saying, “There is no reason for any individual to have a computer in his home” — DEC stuck with its original vision and its product lines, which were incompatible with emerging operating systems.

Related: Learning to Adapt Is the Key to Success

Olsen was removed from the board in 1995 and DEC was purchased by Compaq in 1998. By then, the company had lost money for five of its last seven years.

Complacent companies believe they have figured out the formula to success. In reality, there is no business as usual, no magic formula that leads to sustained high performance and financial success at companies. The long-term and repeated successes of high-performing companies are actually due to constant reinvention — their agility.
Most entrepreneurs start with a culture of agility and a commitment to be responsive to the changing needs of the clients/customers. But as organizations grow and evolve, much of that entrepreneurial daring is replaced with a dogged fixation on “The Plan” — or, in the other extreme, thrashing around in the face of crisis and trying to adapt with urgent, costly and often ineffective crisis management and organization restructuring.

An examination of hundreds of businesses over 20 years of operations has shown us that rather than digging in their heels, successful companies do a better job at four things: establishing a climate for revising strategies, perceiving and interpreting environmental (external) trends and disruptions, testing potential responses, and implementing the most promising changes.

They have a culture of continuous agility. In essence, they have “agility routines.”

With recent research suggesting that the expected life of a new American company is about six years, entrepreneurs who have enjoyed some success, but want to take their business to the next level, must adopt a culture of agility to survive.

1. Strategizing

New business owners must first focus on establishing an aspirational purpose, developing a widely shared strategy and managing the climate and commitment to execution. While it sounds obvious, too many entrepreneurs are focused instead on goals: being number one in the market or meeting threshold monthly financial targets.

An agile organization develops a dynamic strategy with change in mind and has a process for modifying the strategy in the face of change, based on aspirational targets — beyond profitability — that unify and inspire stakeholders.

Related: The One Thing You Need to Keep Your Business Relevant

Perceiving

Next comes the process of broadly, deeply and continuously monitoring the environment to sense change and rapidly communicate these perceptions to decision-makers, who interpret and

formulate appropriate responses.

Agile organizations use the perceiving routine to assess what is happening in their environment better, faster and more reliably than their competition. Entrepreneurs, in particular, fall in love with their products and ideas, and with the original business plans that back them. But this does not allow organizations to be agile. After all, if you’re producing croissants and the marketplace suddenly wants donuts, you’d better come up with a cronut & quickly.

Understanding the Four Measures of Volatility By Scott Rothbort

Updated from 3/8/2007 at 2:15 p.m. EST

“Volatility” is a term that is increasingly interjected into financial market commentary by the press and professionals. In fact, Bloomberg Radio has a daily “Volatility Report.” While the term is being thrown around with a seemingly high degree of expertise, I find that the concept is not well understood by most commentators and the average investor. This module of TheStreet University will cover the four main types of volatility measures:

◾historical volatility;
◾implied volatility;
◾the volatility index; and
◾intraday volatility.

Type 1: Historical Volatility

Volatility in its most basic form represents daily changes in stock prices. We call this historical volatility (or historic volatility) and it is the starting point for understanding volatility in the greater sense. Historic volatility is the standard deviation of the change in price of a stock or other financial instrument relative to its historic price over a period of time. That sounds quite eloquent but for the average investor who does not command an intimate knowledge of statistics, the definition is most overwhelming.

Think of a Pendulum

To help you visualize the concept of volatility, think of a pendulum like in the picture below. The pendulum is constructed from a steel ball, attached to a rope and then suspended from a ceiling.

http://www.thestreet.com/content/image/38564.include

The pendulum starts at the resting state when our ball is at point 2 (the mean). If you raise the ball to point 1 and let it go, the ball would then swing from point 1 to point 3. Over time that ball will swing back and forth always passing though point 2. If this were a stock, the difference in distance from point 1 to point 2 or from point 2 to point 3 represents the volatility in the movement of the stock price.

So as not to get into any trouble with physicists out there, the formulas for standard deviation and movement of a pendulum are different and I am not equating the two from a statistical perspective. Rather, I am only using the pendulum as a visual aide. Stocks with a swing that is greater from point 1 to point 2 vs. that of another stock will have a higher volatility than the other stock.

Now imagine a wind hitting the metal ball. The force of that wind will increase a stock’s volatility. Market corrections, increases in uncertainty or other causal factors of risk will be the wind that shifts volatility higher. Say that there is no wind, but rather calm over the markets. Since there is no outside force to apply motion to the pendulum, the arc of the movement from point 1 to point 3 will decrease. This is when volatility declines. Some call this complacency, but it is generally viewed as a market with low or declining volatility.

Source : http://www.thestreet.com

TERRAINS@Atv006kiranraj

T- Trade
E-Execute
R-Review
R-Rate
A- Analyse
I-Indulge
N-Nudge
S-Sacrament

Terrain , this encourages me to take up this training initiative for StockMarkets, to operate as a consultant, to work on development as a trader, on trades & trade offs.

discuss on log about leverage, per se quid pro quo.

Ms KiranRaj SP
Sole Proprietor / owner / Director

Adventure Terrain Ventures.

Risk-Based Testing and Metrics [article] Risk Analysis Fundamentals and Metrics for Software Testing By TechWell Contributor – July 19, 2001

Summary:

Risk-based testing is reviewed and presented as a case study using it on a system test for a retail banking application with complex test requirements. Test documentation produced prior to test execution was kept to a minimum with responsibility passed to the individual tester. To support this approach, progress tracking metrics were used to track actual progress made and to calculate the resources required to complete the test activities.

Risk-based testing is reviewed and presented as a case study using it on a system test for a retail banking application with complex test requirements. Test documentation produced prior to test execution was kept to a minimum with responsibility passed to the individual tester. To support this approach, progress tracking metrics were used to track actual progress made and to calculate the resources required to complete the test activities.

Inequality hurts economic growth, finds OECD research

Inequality hurts economic growth, finds OECD research

09/12/2014 – Reducing income inequality would boost economic growth, according to new OECD analysis. This work finds that countries where income inequality is decreasing grow faster than those with rising inequality.

The single biggest impact on growth is the widening gap between the lower middle class and poor households compared to the rest of society. Education is the key: a lack of investment in education by the poor is the main factor behind inequality hurting growth.

“This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate,” said OECD Secretary-General Angel Gurría. “Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand over the past two decades up to the Great Recession. In Italy, the United Kingdom and the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened, but also in Sweden, Finland and Norway, although from low levels. On the other hand, greater equality helped increase GDP per capita in Spain, France and Ireland prior to the crisis.

The paper finds new evidence that the main mechanism through which inequality affects growth is by undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development.

People whose parents have low levels of education see their educational outcomes deteriorate as income inequality rises. By contrast, there is little or no effect on people with middle or high levels of parental educational background.

The impact of inequality on growth stems from the gap between the bottom 40 percent with the rest of society, not just the poorest 10 percent. Anti-poverty programmes will not be enough, says the OECD. Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.

The paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented.

The working paper, Trends in income inequality and its impact on economic growth, is part of the OECD’s New Approaches to Economic Challenges Initiative, an Organisation-wide reflection on the roots and lessons to be learned from the global economic crisis, as well as an exercise to review and update its analytical frameworks.