Billions in Put Options purchased betting that the market will crash (UPDATE: CALL MADE?)

reply to post by Yarcofin



All you have to do is look at the groups and name behind of the ones that benefited from 9/11 and you see why right now America needs something and something bad to happen soon.

Yes is very scary but our nation is rule by callous groups with all the power money can buy.

Now I read somewhere in the web a few days back about the Emirates and the markets I wonder if the rich Arabs nations will be the ones betting on some dooms day scenario.

reply to post by marg6043


The groups that benefited last time are likely the ones that are going to benefit again if something happens. If people are so sure that something is going to happen, then the smart thing to do would be invest in those same companies that the "powers that be" are investing in as well. Note: Do your research first though. You should know about investing before you do so, and pick good quality companies that look like they should be heading up anyway, so that you will still profit even if something doesn't happen.

If you feel the event is going to happen no matter what, you might as well profit from it. If it makes you feel bad knowing that you profited from an evil event that you knew was going to happen, you can always donate your profits to charity if it will make you feel better.

Someone is going to profit from these world events, it might as well be you.

Some source information:

Chicago Board Options Exchange:

delayedquotes.cboe.com...

Strike Price Symbol Last Trade Change Bid Ask Volume Interest
700.00 SPZUT 0.05 -0.05 n.a. 0.05 165,000 116,720

also here:

www.optionsxpress.com...

symbol: spx, range: all, type: calls and puts, exp: sep 07

also from the same site, SPY shows a bimodal distribution... most activity is at or around 150... but then there is a series of calls at volume=10,000 price range 60-90

Feel free to correct me if I am looking at the wrong things here.

Sri Oracle

Some information on protective puts:

www.cboe.com...

Possible Outcomes

The Index Rises – At expiration, the puts have no value. However, in exchange for the cost of the puts (an insurance expense to the portfolio), the fund manager achieved the goal of establishing a hedge for a portion of the portfolio and did not incur the expenses of converting that portion of the assets to cash. Also, note that the portfolio retains any dividends associated with holding the assets. Given the assumption of a correlation between the portfolio and the index, the value of the portfolio increases.

The Index Falls – If the puts are at-the-money or in-the-money, an increase in the value of the puts may approximate the loss in the portfolio’s value. Tracking error will undoubtedly have an effect on the actual losses in portfolio value if the composition of the portfolio does not match the composition of the index. However, the protective puts limit the portfolio’s downside, the portfolio retains any dividends associated with holding the assets. If the index falls but the puts remain out-of-the-money, the cost of the puts is an insurance expense to the portfolio.

The Index Remains Stable – The puts have little or no value at expiration, resulting in a loss of the premium, which can be considered an insurance expense to the portfolio. This expense is, at least partially, offset by any dividends associated with holding the assets. The value of the portfolio remains approximately the same.

but is this a protective put?

Or is this a call? I am, admittedly, a little lost.

same source: option basics....
An option is a contract which gives the buyer the right, but not the obligation, to buy or sell a stock (or other security) for a specified price on or before a specific date. There are two types of options, a call (giving the right to buy the security), and a put (giving the right to sell the security).

Sri

It isn't just the SPX 700 either:

Eurostoxx 50

However, I have been told by my cousin, who is licensed by the SEC and has a deep understanding of all matters financial that he believes, as it speculates in the linked article, that it is most likely a large hedge fund hedging against deepening losses.


[edit on 26-8-2007 by ClintK]

While this might be a sound knee-jerk response from "Tin Foil Hat Brigade," I'm not so sure... these trades are very traceable.

So traceable that they (claim) to still not know who benefited from the Put Options placed just before 9/11, or who placed them?

Could be something, could be nothing, but they seem pretty sure. What would it cost to place an option like this? Maybe it is a wild guess, and they're hoping the speculation alone might cause a crash?

Flagged! Might be important.

[edit on 26-8-2007 by mirageofdeceit]

blogs.wsj.com...

August 20, 2007, 10:52 am
Bears Fed Up
Posted by David Gaffen

While the Fed’s move helped many investors last Friday, it slammed a handful who’d wagered that the market would continue to decline. It was especially painful to those who had purchased certain monthly “put” options tied to the Standard & Poor’s 500-stock index, which are contracts that pay off if the index declines below a certain level. Those options expired almost immediately after the opening bell Friday.

So those with august puts got slammed by the fed dropping the discount rate... but in the days that follow even larger (10x) puts are placed for september at even lower levels?

www.rgemonitor.com...
How the Friday “Bernanke Put” Slammed Holders of “Put Options” Betting on a Market Fall

Since roughly 110,000 of those contracts were still open at the start of trading Friday, that represents a theoretical loss of about $800 million for that single contract.

adamsoptions.blogspot.com...
Daily Options Report

by Adam Warner
Monday, August 20, 2007
The Bernanke Short Options Squeeze

Big Ben literally found the perfect minute to cause the most pain to options sellers.

I have no comment at this time... I am just gathering sources at this location until I can filter... hope you do not mind reading along with me.

There is something here though... the fed dropping interest rates on friday had an undeniable impact on s&p puts for august and seems to have spawned completely irrational puts for september.

Sri Oracle

Originally posted by ClintK
that it is most likely a large hedge fund hedging against deepening losses.

No doubt... an insurance purchase.

But a blatant purchase of insurance against a seemingly impossible event to occur within 25 days.

Why buy flood insurance in the mountains? I cannot grasp the rationale.

The only way you could make money on this (sans terror) would be if the fed retracted their decision to cut the discount and instead upped it by 2 points.

Sri

[edit on 26-8-2007 by Sri Oracle]

reply to post by sn00daard


Wow, good story. This make sense why Dennis Hassart, Tony Snow, Karl Rove all leaving the administration on September 1st.

I would not be surprised if Dick Cheney steps down from being Vice President for health reasons soon. I read this idea about Cheney stepping down off of Thomas P.M. Barnett's web site which was discusses on Harvard University's forum.

It's almost as if they are preparing themselves to what is going to happen soon. I've been trying to keep my eye on who else is going to leave the administration.

I suppose the rest of us "Commoners" can only sit back and watch it happen.

[edit on 8/26/2007 by TheInfamousOne]

[edit on 8/26/2007 by TheInfamousOne]

Yeah, I have to be honest -- I don't quite get it either. A thirty percent-plus slide in just a few weeks is a virtual impossibility.

This is really a weird story.

Could this be related

Fed bends rules to help two big banks by CNN

Indeed, this move to exempt Citigroup casts a whole new light on the discount window borrowing that was revealed earlier this week. At the time, the gloss put on the discount window advances was that they were orderly and almost symbolic in nature. But if that were the case, why the need to use these exemptions to rush the funds to the brokerages?

It just gets more and more interesting. Over on tickerforums, they are saying that this was posted, removed and put back up. Along with the actual statement on the fed site.

Edit: I never heard of tickerforums before this weekend, and after sampling a good bit of the discourse there, I agree with skeptic that it's a den of bears, but I do like to see a bear perspective they tend to point out negatives I haven't thought about.

[edit on 26-8-2007 by jefwane]

I'm just a bit curious, would a full blown september presidential impeachment cause a bust?

reply to post by Sri Oracle


To clear things up... puts and calls are both options.

A call option is a contract that gives you the right to buy a stock at a certain price. You use this when you expect the stock to go UP.

A put option is the opposite of a call, a put gives you the right to sell a stock at a certain price in the future. When you expect the stock to go DOWN.

Important to note in either that you don't necessarily have to own the stock, or ever exercise your option.

Then there is short selling, which is not an option, where you sell stock you don't own.

I can provide some examples with actual numbers... if anybody wants to see, U2U me I guess.

[edit on 8/26/2007 by Yarcofin]

Very interesting story indeed, the Europe angle is dated 10 days ago so that bet was made first.

Originally posted by Sri Oracle
... I am just gathering sources at this location until I can filter... hope you do not mind reading along with me.

There is something here though... the fed dropping interest rates on friday had an undeniable impact on s&p puts for august and seems to have spawned completely irrational puts for september.

Not at all. Keep up the good work and I agree with you, It's sorta starting to look like a giant financial game of chicken.



reply to post by SkepticOverlord

It could be a big, extensively-exposed hedge fund looking to force the market down just by the extreme nature of the bet. The market is currently so driven by fear and uncertainty, that it'll probably work. It's an old day-trader tactic on a massive scale.

That makes a lot of sense to me and explains the size and scale of the transaction.

I've been keeping my ears and eyes open for any information related to derivatives and hedge funds since the Bear Sterns blow-up a few weeks back. The same guy who started the implode-o-meter for mortgage lenders has started a Hedge Fund implode-o-meter.

So far 13 major players have funds that have gone kaput.

With the yen carry trade unwinding, the massive infusion of liquidity in recent weeks (thank you helicopter Ben ) changing the overnight funds rate on that Friday morning, and an upcoming FED meeting that will no doubt lead either to a massive hit on the dollar (interest rate cut - Wall Street's preference) or a massive hit to borrowers (interest rate hike) - both a massive hit on the overall economy BTW and if they leave it unchanged the market will decide it's a negative move IMO; as well as the continuing bad credit virus spreading far and wide (credit cards are next)...

It's not such an outrageous bet that markets will go down.

Originally posted by djohnsto77
The only way this trade would lose money is if the stock market goes up. Any move down would be profit, doesn't need to be a crash.

If we do see "new high" in the markets anytime soon they'll once again be "nominal" highs rather than real new highs. Despite the "sucker's rally" of this past week thanks to the infusion of liquidity the fundamentals remain very worrisome.
.

[edit on 8/26/2007 by Gools]

Yarcofin,

I understand both of those. I've bought calls before(have made and lost money on them) never exercised one due to funding though, allways trade out before expiration. I think I understand the mechanics of short selling but I don't want to be subject to margin calls so it's not something I'm really into. One of the reasons that I don't mess with puts, is the margin requirements I'd love to trade them but you have to have either the stock,cash, or "credit line" (i think traders call that "margin") to exercise them(put them to someone). I think that my lingo is bad but my base knowledge is decent.

What is confusing to me is the more complicated stategies involving spreads, straddles, strangles, etc.. I think I kinda understand them, but I'd rather spend my time researching a stock I expect to go up then learning about them. (Well that and spending too much time on ATS)

So does anyone think the banks getting special permision to lend more than 10% of total assets to thier brokerage units is unrelated to these options?

[edit on 26-8-2007 by jefwane]

[edit on 26-8-2007 by jefwane]

I was talking with a friend the other day about the market collapsing and seem to recall a rule in which, the market closes if it starts to drop below a certain percentage. From my understanding it is for people to take a breath and examine whats going on in the effort to prevent a massive devaluation of the market.

Does anybody have any information regarding this? If this were the case then I believe it would take something really catastropic to devalue the market by 50%.

Originally posted by Yarcofin
Terrorist attacks will not ruin the stock market, it will drive the price for gold, oil, defense stocks, etc. through the roof.

The 9-11 attacks had a hugh impact on the market Gold and silver dropped to the the lowest price. The rest of your statement I assume is correct. (Wish I invested in gold back in 2001)
Palidiam? Mix of nickel and platitum. Drove through the roof- when the attacks happened. (Sorry for the spelling)

US Troops are Deploying to Washington

No it not a joke or made up read about it yourself...

www.wesh.com...

Originally posted by XR500Final
US Troops are Deploying to Washington

No it not a joke or made up read about it yourself...

www.wesh.com...

Operation Noble Eagle.

Since when does the Army have "training" operations that last a year, especially one in the middle of DC?

Honestly, I think that story is incredibly weird as is the 4.5billion in puts....

I could understand millions, thousands, but we cannot grasp a 4.5billion dollar bet.

Interesting times we live in..

I have a question though.. assuming the market does crash and we enter a recession, what is the likely hood or scope of potential unemployment? Will it only be white collar jobs lost? Or will every thing from banks to mcdonalds be hit?

Sensational title...innocuous follow-up article: Local Troops Deploy To Nation's Capital. Doubt that it's related to a pending economic melt. Hurricane Katrina confirmed that we don't prepare for crises...we respond to them...when we get around to it. Probably just the tail-end of the 911 response team just getting underway

But on the other hand, these troops are being sent to protect the Capital...not the NO poor. I would like to know more about it if anyone has info. A year-long deployment to protect against a threat from the air? What threat from the air exactly?

When trying to understand options, it helps to be at least mildly dyslexic (I am not) but there is plenty of info available on the web. I compare options to the casino craps table. Beyond the basic pass-line/don't pass-line (calls/puts) bets...there are myriad ways to bet, leverage, and hedge your money...makes me dizzy. Essentially, the trades everyone is buzzing about are bearish...bets against the market. They are also unusually large for options plays. Some are speculating that the Eurostoxx activity has to do with insiders (the banking interests?) speculating on the domino effect in German bank failures. It was announced yesterday that the German state owned bank Sachsen LB is officially in need of rescue. Take your pick...I've read that it's China, angry shorts...just about everything with the exception of the Reptilians & Tiny Tim.