JPMorgan’s Trading Loss Is Said to Rise at Least 50%

New York Times

The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses.

When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank.

A spokeswoman for the bank declined to comment, although Mr. Dimon has said the total paper trading losses will be volatile depending on day-to-day market fluctuations.

So Dimon said this would get worse. Here we have an additional one billion dollars in losses as assessed by “people with knowledge”. The reason according to one experienced credit trader was as follows:

He estimated that the initial loss of just over $2 billion was caused by a move of a quarter percentage point, or 25 basis points, on a portfolio with a notional value of $150 billion to $200 billion — in other words, the total value of the contracts traded, not JPMorgan’s exposure. In the four trading days since Mr. Dimon’s disclosure, the market has moved at least 15 to 20 basis points more against JPMorgan, he said.

So does this have the potential for significant further losses? It’s only been four days and the loss has risen by 50% of the original.

I thought the potential for much worse damage was not in the value of the contracts but the bets taken against JP Morgan’s trade of which could cascade into further losses by more betting against the institution’s losing trade?

I’m not an investor or trader or anything, just interested in how this could snowball and if it has potential to become something far greater and disastrous.


See also
And Now JP Morgan's $2 Billion Trading Loss Is Already $3 Billion (And Counting)


Cheers

Nothing to see here friend, Too Big To Fail.

I wonder how many Families lost their homes in the last 4 days , because they were the right size to fail.

i read a book about lehman's collapse,,,,,,,,,,,, basically in 6 days they went from flush with millions in cash on hand to bankrupt and no one willing to lend at any level


it amazed me how quick it can come crashing down