Thought I would post the current installment of the DOW crash chart. George is correct that Fed, and gubmnt analysts pour over the same TA that we do...that's what we pay them for...right? The critical timing of last weeks divergence from the historical DOW trajectories (discount window gusher) might support this...ya think?

Ok ATSer's. time to wake up. There is so much misunderstanding on this thread that i need to step in and correct folks. I do this for a living so Iknow what i am talking about.

First off, there are currently 100's of thousandsofoptions on both sides of the fence outstanding for the Sept expiration. They are a bit weighted to the downside, but not by that significant of a margin.

Secondly, everyone keeps saying that someone bet 4.5 billion that the market would go down 30% by expiration. That is not so. These options will only result in profits or losses about equal to the moves in the market. That goes for both the US and European options that have been discusses.

For the S&P options, someone paid about $750 or so, for the right to buy the S& P index fund (symbol=SPY) for $700 on Sept 18. S&P was trading at about 1450 at the time, so not much premiium was paid. Someone also took the other side. This is not an all or nothing bet. The call will change in value by the same amount the S&P changes in value. Thus if the S&P falls 100 points then the options become worth $650. if the S&P rises 100 points they become worth $850. Do you get the picture?
These are not an all or nothing bet. Just a way to get about double the return or loss of the SPY.

Chances are this was just a move to raise funds without having to crash the markets by selling a boatload of stock. Upon expiration whoever bought these calls will fork over another $700 and will then hold the underlying stock represented in these options.

Currently the S&p 500 is at 1453, so neither party to this transaction has either lost or made any significant money. In my experience, with trades of this size, the price level always gravitates back to the break even point. I would not be surprised at all to see the S&P finish the contract at exactly 1450.

On the whole, people in ATS have a great deal of technological knowledge. Some also seem to be able to see through a great deal of BS, although most of you missed it on this thread. These can be great attrributes for investors. It does seem that many are oppossed to the capilistic system, i am also, but i have also learned that sometimes you have to join them to beat them. And if the system falls apart? It really won't matter anyways, will it? The way it is now you have to be an owner and not a loaner.

I will posting a thread shortly, mods would this be allowed?, to see what ATS'ers think could be the next emerging technology worthy of investing in. i am sure that amongst us all, we could come up with some real winners.



[edit on 8-9-2007 by disgustedbyhumanity]

Just a little confused here....you said that someone had claimed $4.5 billion in puts were purchased and then you started talking about the SPY for $650? As in 650 1 dollars bills? Maybe I missed a multiplier or something?

Am I the only one who notices that the stock market tanks on a thursday or friday and then has a miraculous turn around on mondays?

The weekend effect can work two ways. Black Tuesday came after Black Thursday. Black Monday came after a bad Friday. Traders had a weekend to panic.
Nowadays, I think people tend to react with less panic over a bad day as the large drops on a Thursday or Friday aren't that large, percentage wise. Nowadays, what we tend to see is more of a continuing downward trend. Take 2000 for example. The market started tanking in March 2000 and the continual drop became big enough that mutual fund investors started pulling money out of their funds. When enough people pull money out of mutual funds, the funds must sell stock to dole out the cash. This selling pushes the markets lower, more people panic, more selling etc.

In the event of a big terror attack here in the US, or some other global event that would strike fear in the heart of the markets, we might see that big one day drop. If that happens on a Thursday or Friday, the following days would be such that the investors would be stuck stewing over their losses and by the time the markets opened Monday morning they'd have already called their brokers, telling them to unload before it gets worse.

Again, I just think that what we're calling a big drop on a Friday is only big in number, not in percentage, thus we don't see the expected free fall.

Originally posted by disgustedbyhumanity

Ok ATSer's. time to wake up. There is so much misunderstanding on this thread that i need to step in and correct folks. I do this for a living so I know what i am talking about.

Thanks for taking the time to explain this disgustedbyhumanity. We appreciate the input as you are correct, there is a lot of incorrect information posted here.

I was particularly interested because, being uninformed on the mechanics of those transactions it was easy to tie in the 'standdown' on Friday the 14th to a conspiracy of some sort.

Thanks again for your time.