0.35% Premium in Birmingham

The calculation of market movements, when tied to specific events, presents a peculiar challenge. A recent bulletin speaks of an average 0.35% return premium during weeks when equity index options expire. This measurement, precise as a ledger entry, describes a phenomenon attributed to the rebalancing of market makers’ positions. One considers the impact of such a finding.

In Birmingham, where the smoke from the factories hangs heavy, a small investor might hear of such a premium. They might then adjust their meagre savings, hoping to catch this predictable rise. The information, once confined to the desks of those who trade in large sums, becomes fodder for the common purse. The market, which functions on the collective actions of many, is then altered by the very knowledge of its patterns. It is not unlike describing the exact moment of a tide’s turn. If all the fishing boats then rush to that precise spot, the tide itself, or at least the catch, will be affected.

The duty of the observer is to record what is seen, to measure what can be measured. The 1834 Poor Law Amendment Act, for example, was intended to curb pauperism. Its effect on the families in Norwich workhouses, however, was a matter of immediate and stark observation. The principle of deterrence was clear in the statute. The reality of families separated and children starving was equally clear. The gap between the stated intention and the observed outcome is where the true understanding lies.

To publish that 0.35% premium is to hand a tool to every person with a shilling to invest. The consequence of this widespread knowledge is not easily predicted. The very act of making the pattern known might erase its predictability, as the market adjusts to the new information. The ledger shows the past, but the future is always written anew by the hand of human action. The information is now released.