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From Kirsten Bischoff, Opalesque New York: The weeks leading up to the US Presidential election have not seen a traditional “October Surprise”, perhaps because the harsh realities of the snowballing credit crisis kept its grip on the nation’s attention. Merrill Lynch’s “Hedge Fund Monitor” research piece summed up October’s vicious market cycle attributing much of the rout to hedge funds and other investors being forced to sell stock due to the “self perpetuating margin call” of deleveraging and investor redemptions.

Penso Capital’s Global Crisis Strategy, which was launched in February 2008, saw its highest fund performance in the month of September (according to hedge fund databases) as it captured the profits on the bearish view it took on Europe (see previous Opalesque story here). But as that risk/reward profile has changed, the New York-based team is now looking to the declines and volatility in equities which has presented new targets of opportunity.

“Option-like equities happen very rarely, when a stock price gets to a point where it trades like an option.” Principal Steve Gross explained to Opalesque.

Gross cites Morgan Stanley as an example of such pricing. The firm has seen price swings from $67.60 to $6.71 over a 52 week history and Gross says “......................

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