KW: I have to admit that my understanding of the derivative market is simpistic at best and as we don’t have a derivative market in NZ have never ben exposed to their functions BUT the finacial world is threatened once more by these financial time bombs that are altready starting to explode globally. I also admit that until now I had not heard of autocallables but this is in reality nothing more than finacial derivatives created by some smart-arse trader to generate an income from rising share markets and keep him in ahigh paid job. When share markets go south the shit hits the fan and all of a sudden rather than collecting income these derivatives require you to stump up cash, lots of cash and this apparantly is what is happening now. Derivatives mean you can get to own an asset without putting down or outlaying all the cash to pay for it/them as a bank lends you the balance required to own the asset. When the asset price falls then you have to meet the margin call that the bank requires. There are trillions$ of these derivatives all around the world with banks interconnected and requiring settling the accounts they have which each other after a days trading. This has caused the repo market carnage that the FED is trying to sure up so far without success despite throwing another $1.5trillion of printed money created out of thin air at the problem (read previous financial posts to understand more about this). Now it sounds like the South Korean variant of these derivatives, autocallables, are about to hit globally which is going to be pretty scary for everyone. Hold onto your hat!

“Should autocallables break barriers in the KOSPI 200 or the Euro Stoxx 50, then the structurers will turn into volatility buyers, not sellers. Higher volatility leading to margin calls look likely, which would drive the market lower.”

Source: Is South Korea About To Unleash A Neutron Bomb Across Global Stock Markets | Zero Hedge