OptionsHouse

Options Trading News

January 4, 2013  Fri 8:09 AM CT

RIG: SEE CHART GET CHAIN FIND STRATEGIES
If you aren't a regular observer of stocks, if you are perhaps someone who lurks in Congress, then you don't understand the importance of certainty to the investing process.

If you want living proof of the need for certainty, look no further than Transocean, which agreed to pay a $1.4 billion fine today for its role in the Gulf oil spill.

I am sure that many people might say that's a huge amount--devastating, even--particularly because when the spill first occurred it was universally believed that Transocean wouldn't be held liable. I know that I was lambasted when I said that RIG was not getting off without some penalty.

But, put simply, until today we didn't know what size check Transocean would have to write. Frankly, if it had been double that amount I think the stock would still be up today because it removed the company's open-ended exposure to this matter.

TheStreet.com logoI point this out because many people were astounded yesterday that the market could rally so much on a tax hike for the wealthy and lots of other negatives that involved avoiding the so-called fiscal cliff. I have been saying for months that any deal, even a bad one, would bring about a rally because of the certainty it would give to those trying to figure out how much to save, how much to invest, and how much to commit.

Well, most people I have talked to said we got a bad deal. (Personally, I think it could have been much worse.) The result? A rising market.

Certainty--whether it comes from a big fine from the Justice Department or a big tax increase from Congress--allows investors to assess, to navigate, and to plan.

We got it in Transocean. We got it in our paychecks.

The moves make sense, as long as you recognize that certainty is the Holy Grail of capital commitment.

Disclosure: Cramer's charitable trust has no positions in any of the stocks mentioned.
Share this article with your friends


Related Stories

RIG

Cautious trade in Transocean

June 26, 2015

The offshore energy driller is down 64 percent in the last 12 months and has been pulling back since mid-May, but shares are still in a range that has been in place all year.

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »