posted on Aug, 26 2007 @ 08:40 PM
Regarding the theories about both China and Iran, let me just make a couple comments.
I doubt it's China. The reason I say that is that both indices mentioned are non-US stocks. The Eurostoxx 50 are all European companies. The S&P
700 are also all non-American. In fact, they divide into subcategories of S&P Eurpoe (350 stocks), S&P Topix (150 Japanese
stocks), S&P ASX 50 (Australia), S&P TSX 60 (Canada), S&P Asia 50 (Asia, obviously) and S&P Latin America 40. I would
think if China was going to do anything they would target American companies because the American companies would go down the most. Clearly, whoever
is buying these puts thinks NON-American companies are going to be the ones hit.
As far as Iran, if the US simply struck Iran, I don't see that hurting foreign markets by 30 percent. The idea that there would be a
terrorist attack, however, to justify an attack is different. But it would have to be a terrorist attack in Europe and it would have to be
absolutely HUGE to make the markets take that big of a dive -- much bigger than 9/11.
On the other hand, if a terrorist group has gotten ahold of a nuke, and they were the ones who bought these puts, they would be making billions
of dollars just on the ones we're discussing here. And while it is true that these purchases can be traced, they would no doubt use a series of
proxies to hide the money trail. The terrorist thing seems like tin foil hat stuff, but it happened on a smaller scale on 9/11.
"St udio, clink k , and tom bedlam have regarding these stock options being bought. is it really a big deal?"
Speaking strictly for me, I just don't know. That's what I'm trying to figure out here. The terrorism thing seems like tin foil hat stuff but
this is a very risky bet, and I'm trying to figure out why someone would do that.
"but they might just have 'boxed the field' in smaller increments, i.e. spent the same or greater than 4.5 Billion$ on higher options/
'calls' but spread an equal number 'put & calls' options over a dozen or more brokerage houses so that their 'hedge' would not attract the
attention which their initial & obvious 1st 'Short' options gained,
to move-the-market in the 1st place."
Well two things. First, it doesn't quite work like that. While there may be various brokers, options, like stocks, trade through a single exchange,
which keeps track of volume as well as ask and bid prices. So somebody couldn't really hide a large purchase. The thing with a call that's
different is that if you really thought the market could be going up by 30 percent you'd buy with a strike price close to the current price of the
underlying asset. It would be more expensive to buy, but you'd make some money even if it only went up, say, 5 or 6 percent, and it could even go up
more than 30 percent.
The thing that gets me in all of this folks is that someone is betting staggering amounts of money that the non-American markets are going to dip by
30 percent in the next four weeks and the question is why? And to make matters worse, they paid huge prices for such options. A put predicting a
30-plus percent price drop would normally be dirt cheap because there would be almost no chance of exercising it. But if someone wanted to buy lots
of them in a hurry they would drive their own price up.
I'm going to bed. I'll talk to a few people tomorrow who know a lot about this stuff and see what they think is going on.
[edit on 26-8-2007 by ClintK]
[edit on 26-8-2007 by ClintK]