Put Option Trading "Innocuous?"

I hate to think it was all about the money but it just keeps coming home to roost. Was 911 the biggest ripoff in the history of the world?

Isn't it always about the money?

Money made on put options
Gold alledgedly under the towers
Money made on insurance on the towers
Money made on "scandals", when sec offices were destroyed
Money the pentagon lost, trillions by Rummys own admition(that section of the pentagon was the section hit)
Money made by haliburton(chaneys old diggs) and the military industrial complex because of the iraq war

Originally posted by Caustic Logic
Sauron: Thanks for that post! That's what I was gonna go find, but hey, leverage others' brains. There's bored people... I looked into all this once, but I forgot Flocco was involved. I'll have to check all this out for myself before going off...

Nick: Stellar contribution!

Too good actually to comment on at the moment, that's for when I really dig in.

Originally posted by Skadi_the_Evil_Elf
Since we are on the subject of stock bets, I got 1000 pounds sterling to bet that the real people behind those put options were the Saudis, [...] Bin laden, After all, is a Saudi.

Hmmmm... Because all the Saudis knew, and wanted it to happen, becuase they want to see their buddies' nation fail under terrorstorm, and think they can sneak in some foretelling side deals and then waltz up and claim the dividends? I still haven't sorted it out for myself, but it seems an American job. It shows probable foresight, an apparent side-stepping of intelligence tip-offs, and a domestin pedigree that rendered it harmless-seeming and so they actually DID collect. Hmmm...

IMO all the Saudi bashing is psyops. Not that it's all untrue, but framed up and much-hyped. No action? No bombing? Good buddies? That's a silk veil draped over a sharp sword. A blank-check threat. Pakistan's situation is much similar. Most charges of Pakistani involvement in 9/11 originate with Indian intelligence but are bought (again tho not acted on yet) by the Powers That Be. Such dirt, real or fabricated, on the top nuclear power and top religious and oil-producing power in the Muslim world might prove useful in the multi-generational "Long War" against the bad guys of the Muslim world.

Have a nice Sunday!
[edit on 20-5-2007 by Caustic Logic]

[edit on 20-5-2007 by Caustic Logic]

Hmmmm.......

It is a well known fact the Saudis are the biggest exporters and funders of of extremist recruiting mosques in western countries. They finance and support terror alot. 15 of the 19 hijackers were Saudi Nationals. Bush has been in bed with the Saudis. Their oil money buys them alot of leeway in DC. Hell, their human rights record is worse than Iraq's.

If the US government had foreknowledge and participation in 9/11, you can bet the Saudis had involvement too. From a different angle perhaps, but their fingerprint is all over this too.

Originally posted by Bhadhidar
The US Securities and Exchange Commission (SEC) probably has, or could access the ownership answers you seek.....IF sone one in high enough a position of authority were to request the data.

Fat chance of THAT ever happening!

Could this not be covered in the FreeDom of Information Act???


Since this is also a major well... should be a major deal to... well everyone cant we get something done.

Originally posted by Paul3

In naked call selling, an investor pledges to sell stock he or she doesn't own. If the stock price rises, the seller is on the hook not only for the price of the options, but for the stock, too. But if the stock falls in price, the profits can be huge.

Just for the record, selling naked calls does not result in huge profits. The only profits are those that are realized when the investor receives the premium for selling the calls. After receiving the premium, the investor can realize no additional gains, only losses on that position.

Originally posted by Skadi_the_Evil_Elf
It is a well known fact the Saudis are the biggest exporters and funders of of extremist recruiting mosques in western countries. They finance and support terror alot. 15 of the 19 hijackers were Saudi Nationals. Bush has been in bed with the Saudis. Their oil money buys them alot of leeway in DC. Hell, their human rights record is worse than Iraq's.

Yes, thank your the quick rundown again. This actually shows my point. I'm no fan of the royals, mind you, and there's truth to all these charges to some degree, but also geoplitics (many examples). Isn't the Saudi complicity a bit obvious? Think about gain, like what would they have to?

It's all complicated. I dunno. Anyway, not to get de-railed, this is about the Put Options. Somebody almost seems to have had foreknowledge of the attacks and leveraged it for profit. If you have any good evidence as to who placed these, feel free to add it to the pool.

Originally posted by shooterbrody

I hate to think it was all about the money but it just keeps coming home to roost. Was 911 the biggest ripoff in the history of the world?

Isn't it always about the money?

Somehow I fell like it's got to be about more than that. Well ultimately, it's about empire and defense contracts and so on, but not just the money of those options for those traders. That's too simple.

We see insiders somewhere in the crossover world of intel and investment banking (mmmmmwallstreet-CIA land anyone?). The perfect people to either sense sinister Saudi scheming and pass it on to the intel community as a warning that something was up - or alternately, to place the orders themselves and orchestrate a blind-eye turning by the intel community? What about the other possible reasons besides raw profit?

I note the initial strategy of the one company has bets on both United and American, and on the American bets had a bunch of company after that tip-off from some company. Sorry, that's literally all I have assemble in my brainpan at the moment. But already it feels like some kind of complicity-generator. All those investors would collect money from the worst disaster in US history. They have to feel odd, and what would they think of the firm that had handed them this psychic advide?

How was that advice worded and justified? What exactly were the profits earned and collected? These are all the questions I'm too lazy to have gleaned even from this thread.
Hectic weekend.

Cameron: I realize investigations have already been done, and ultimately I am arguing a bit from ignorance and appealing to mystery. But I don't mean to be a dummy, and intend to actually look at all the established "facts." Or at least the main ones. After all, 9/11 itself has been "thoroughly" investigated, as we've seen, and it still seems there are so many things left unexplained. Not as many as many seem to think, but still...

edit to add quotes to "facts."

[edit on 21-5-2007 by Caustic Logic]

delete dbl post

[edit on 21-5-2007 by Caustic Logic]

Originally posted by nick7261

Originally posted by Paul3

In naked call selling, an investor pledges to sell stock he or she doesn't own. If the stock price rises, the seller is on the hook not only for the price of the options, but for the stock, too. But if the stock falls in price, the profits can be huge.

Just for the record, selling naked calls does not result in huge profits. The only profits are those that are realized when the investor receives the premium for selling the calls. After receiving the premium, the investor can realize no additional gains, only losses on that position.

Are you calling Mr. Erlanger a lier or that USA TODAY Prints lies.
Phil Erlanger, tracks short interest and options on www.erlangersqueezeplay.com

Originally posted by Paul3

Originally posted by nick7261

Originally posted by Paul3

In naked call selling, an investor pledges to sell stock he or she doesn't own. If the stock price rises, the seller is on the hook not only for the price of the options, but for the stock, too. But if the stock falls in price, the profits can be huge.

Just for the record, selling naked calls does not result in huge profits. The only profits are those that are realized when the investor receives the premium for selling the calls. After receiving the premium, the investor can realize no additional gains, only losses on that position.

Are you calling Mr. Erlanger a lier or that USA TODAY Prints lies.
Phil Erlanger, tracks short interest and options on www.erlangersqueezeplay.com

I'm saying the Mr. Erlanger's characterization that the "profits can be huge" for selling calls is a completely misleading. Call options are sold at a market price called the "premium." When somebody sells a call option, they receive the premium -no more, no less.

If the stock drops in price, the value of the premium will drop to zero, which means that the seller's profit will be 100% of the premium for which he sold the call option for in the first place.

And yes, to answer your question, the USA Today consistently prints "lies" when it comes to investing information. The above quote from Erlanger's column is a perfect example.

If the stock price rises and the option price rises, the orinigal seller of the option can buy the option back -he is not on the hook for the price of the option and the stock as well. In fact, it's just the opposite. If the price of the stock rises the initial option seller's loss is offset by the premium he received when selling the option -not "on the hook" for the price of the option as well.

Just to clarify for everyone...

Betting "against" a stock is called "selling short". You SELL stock that you do not own at TODAYS PRICE then BUY it back to COVER at a later date and if the price has GONE DOWN you take the difference MINUS FEES... THIS IS NOT WHAT OCCURRED HERE.

The main difference is that OPTIONS:

1. Are sold/bought at a fraction of the price of a share stock because you are only paying for the OPTION of BUYING or SELLING at today's price.
2. OPTIONS EXPIRE which means that your timing MUST BE IMPECCABLE AND YOU MUST EXERCISE YOUR OPTIONS IN THE ALLOWED TIME FRAME OR YOU LOSE ALL OF THE MONEY!

So... Part of the reason using NAKED PUT OPTIONS instead of just SELLING SHORT is so freaking suspicious is that:

1. They HAD to assume the stock would fall in a VERY SHORT TIME FRAME... not just OVER THE LONG RUN.
2. USING OPTIONS allowed them to leverage 2, 4, maybe 10x the actual number of shares they could have sold short at full price.

Put Options are considered one of the riskiest moves you can make unless you have a REALLY, REALLY good reason to believe that the price will fall and, in this case (95%-100% of options purchased) you want the option to sell EVERY FRICKING AVAILABLE SHARE AT THE PRE CRASH PRICE, BUY THEM BACK AT THE POST CRASH PRICE AND KEEP THE DIFFERENCE.

The ONLY other explanation is that "he/they" were hedging a long position, if that were REALLY THE CASE they should be able to EASILY show that they owned TONS of AA/UAL stock at the time and were just covering their asses. That makes little sense though as they would only be hedging for a LIMITED TIME FRAME, essentially hedging against an imminent disaster... Airline stocks were buy and hold IF THAT, no one, especially "rich investors" would be playing them short term and hedging them short term... THIS MAKES LITTLE SENSE.

The 9/11 Commission is really saying:

"Some rich guy/company bought all of these options to hedge "something we are not going to tell you what" and WE KNOW he had no inside info..."

That is the most PISS POOR explanation I have EVER heard. NO ONE would pay for those options without a damn good reason and they will have the average Joe believe that it is just a normal trade. I call BS.

[edit on 21-5-2007 by Pootie]

[edit on 21-5-2007 by Pootie]

Pootie,

In your attempt to clarify things, you may have muddied the waters a bit...

Originally posted by Pootie
Just to clarify for everyone...

Betting "against" a stock is called "selling short". You SELL stock that you do not own at TODAYS PRICE then BUY it back to COVER at a later date and if the price has GONE DOWN you take the difference MINUS FEES... THIS IS NOT WHAT OCCURRED HERE.

Correct.

The main difference is that OPTIONS:

1. Are sold/bought at a fraction of the price of a share stock because you are only paying for the OPTION of BUYING or SELLING at today's price.

Not exactly. Options have a strike price, which is the price of the stock at a future date, which is called the expiration date. An option gives the holder of the option to buy or sell the stock at the strike price at a future date. If an option is "in the money" the price of the option will be almost the same as the price of the stock. If the option is far out of the money the price of the option will be very low compared to the price of the stock -often as low as $0.50.

2. OPTIONS EXPIRE which means that your timing MUST BE IMPECCABLE AND YOU MUST EXERCISE YOUR OPTIONS IN THE ALLOWED TIME FRAME OR YOU LOSE ALL OF THE MONEY!

There are many options that expire well over a year from the date of purchase. You don't need to be impeccable in your timing at all, and investors rarely, if ever, actually exercise their options. They reverse the trade by selling the option they bought, or buying back the option they sold.

So... Part of the reason using NAKED PUT OPTIONS instead of just SELLING SHORT is so freaking suspicious is that:

The options in question re 9/11 were NOT naked put options. Naked options refer to SELLING the option with no underlying stock to make good on the option. The put options in question were simply bought and owned by the investor.

1. They HAD to assume the stock would fall in a VERY SHORT TIME FRAME... not just OVER THE LONG RUN.

This is not necessarily true. Nobody has made public the expiration date, or the strike price of the options in question. They could have been long term options, or several months out.

2. USING OPTIONS allowed them to leverage 2, 4, maybe 10x the actual number of shares they could have sold short at full price.

True. The options allow the investor to control more stock with less money.

Put Options are considered one of the riskiest moves you can make unless you have a REALLY, REALLY good reason to believe that the price will fall

Not true at all. Buying put options has less risk than selling stock short. When you buy a put option the most you can lose is the amount you paid for the option when you bought it. When you sell stock short your risk is theoritically infinite.

and, in this case (95%-100% of options purchased) you want the option to sell EVERY FRICKING AVAILABLE SHARE AT THE PRE CRASH PRICE, BUY THEM BACK AT THE POST CRASH PRICE AND KEEP THE DIFFERENCE.

Not exactly. The put options that were purchased pre-crash would increase in value post-crash. The investor could simply sell the options on the open market and would never complete any stock transaction. This is why the leveraged aspect is important. The price of the options often increase far more than the price of the stock decreases. A $1 option could be worth $20 after the crash.

The ONLY other explanation is that "he/they" were hedging a long position, if that were REALLY THE CASE they should be able to EASILY show that they owned TONS of AA/UAL stock at the time and were just covering their asses.

From what I read, there were no long positions being hedged.

That makes little sense though as they would only be hedging for a LIMITED TIME FRAME, essentially hedging against an imminent disaster...

People hedge with options on a short-term basis everyday. The short-term options are less expensive than the long-term options.

Airline stocks were buy and hold IF THAT, no one, especially "rich investors" would be playing them short term and hedging them short term... THIS MAKES LITTLE SENSE.

This is completely false. People buy and sell huge amounts of stocks and options with their holding period sometimes being MINUTES. And without knowing the strike price, the expiration date, or the premium the investors paid, there is no way of telling how much money was made or lost on the 9/11 put options.

The 9/11 Commission is really saying:

"Some rich guy/company bought all of these options to hedge "something we are not going to tell you what" and WE KNOW he had no inside info..."

Without knowing the premium the investor paid, there is no way to conclude this. The options could have been bought for $0.20 a contract.

That is the most PISS POOR explanation I have EVER heard. NO ONE would pay for those options without a damn good reason and they will have the average Joe believe that it is just a normal trade. I call BS.

Trust me. This type of trade is not THAT unusual. Just look at the option markets everyday. Go to the CBOE website and just scan through some different stocks everyday. I know people who play options for $100,000 - $200,000 a trade like the average joe plays $5 chips on a roulette wheel.

I'm not saying that these put options aren't suspicious. I'm just saying that without knowing the details, it's impossible to make a conclusion one way or the other. Somebody insider with foreknowledge could have made millions, or some lucky schmoe could have made a few thousands dollars. Without knowing the trade details, there's no way to tell.

Originally posted by Paul3
This is from USATODAY.com- 09/26/2001- Much attention has been paid to the high level of put options-bets on falling stock price. but some investors also were playing an extremely risky game of "naked call selling" just before Sept. 11.
In naked call selling, an investor pledges to sell stock he or she doesn't own. If the stock price rises, the seller is on the hook not only for the price of the options, but for the stock, too. But if the stock falls in price, the profits can be huge.
"It's not the type of thing you'd normally do, unless you were sure the stock price was going to go down," says Erlanger. "There was nouthing going on to warrant that kind of speculation.

I would like to know the names of these investors. If it was all on the up and up Why are they withholding the names!

I think I would rather take Mr. Erlangers word on naked call selling. I can't help but get the filling that some people on this site aren't here to help find the truth.

Originally posted by nick7261
Not exactly. Options have a strike price, which is the price of the stock at a future date, which is called the expiration date. An option gives the holder of the option to buy or sell the stock at the strike price at a future date. If an option is "in the money" the price of the option will be almost the same as the price of the stock. If the option is far out of the money the price of the option will be very low compared to the price of the stock -often as low as $0.50.

Not so fast my friend. GOOG = $470/share buy... a THIRTY DAY $250/share put option is $0.15... YOU DO THE MATH... What if I knew they would "crash" this month? What is that leverage?

Originally posted by nick7261
There are many options that expire well over a year from the date of purchase. You don't need to be impeccable in your timing at all, and investors rarely, if ever, actually exercise their options. They reverse the trade by selling the option they bought, or buying back the option they sold.

Right. SOME options are able to be exercised for a longer term, HOWEVER, the vast, VAST majority are purchased for < 90 days. Admit that.

Originally posted by nick7261
The options in question re 9/11 were NOT naked put options. Naked options refer to SELLING the option with no underlying stock to make good on the option. The put options in question were simply bought and owned by the investor.

I thought the post was edited to remove the word naked... My bad, It cannot be edited now.

Originally posted by nick7261
This is not necessarily true. Nobody has made public the expiration date, or the strike price of the options in question. They could have been long term options, or several months out.

AGAIN, the VAST MAJORITY of all option trading is < 90 days... just use GOOG options chart and look at the volumes.

Originally posted by nick7261
True. The options allow the investor to control more stock with less money.

Originally posted by nick7261
Not true at all. Buying put options has less risk than selling stock short. When you buy a put option the most you can lose is the amount you paid for the option when you bought it. When you sell stock short your risk is theoritically infinite.

Wrong. With an option, if you see the trend, you just NEVER EXERCISE THE OPTION and LOSE all of your investment. With a short, if you spot the trend you can bail IMMEDIATELY. We disagree on the risk. If you are not paying attention, you may be correct.

Originally posted by nick7261
Not exactly. The put options that were purchased pre-crash would increase in value post-crash. The investor could simply sell the options on the open market and would never complete any stock transaction.

What do you mean "not exactly"? The 9/11 Omission says a SINGLE ENTITY boutgh 95% on 9/9. Where is your confusion? YOU CAN'T SELL THE PUT OPTIONS IF THE STOCK IS SKYROCKETING.

Originally posted by nick7261
From what I read, there were no long positions being hedged.

EXACTLY. So, what was the impetus for buying 95% of the outstanding put options on AA?

Originally posted by nick7261
People hedge with options on a short-term basis everyday. The short-term options are less expensive than the long-term options.

Like I said, you DO NOT hedge a long term long with a short term put option... you are only REINFORCING the point that options are usually SHORT TERM.

Originally posted by nick7261
This is completely false. People buy and sell huge amounts of stocks and options with their holding period sometimes being MINUTES.

Not airlines in 2001 pre-911 and NOT a commercial firm. Maybe your neighbor, but not a fund manger.

Originally posted by nick7261
Without knowing the premium the investor paid, there is no way to conclude this. The options could have been bought for $0.20 a contract.

Not according to the potential profit reported in the MSM. Google.

Originally posted by nick7261
Trust me. This type of trade is not THAT unusual. ...
I'm not saying that these put options aren't suspicious. I'm just saying that without knowing the details, it's impossible to make a conclusion one way or the other.

Given statistics, trends and the secrecy involved a conclusion can be drawn.

Your posts seem very misleading and apologistic... No offense intended, but this is not normal fund manager or fax blast trading.

[edit on 21-5-2007 by Pootie]

Originally posted by Paul3

I think I would rather take Mr. Erlangers word on naked call selling. I can't help but get the filling that some people on this site aren't here to help find the truth.

Maybe you're one of the people not interested in finding the truth. You obviously don't understand options. Deny ignorance...

Here's how naked call selling works:

Suppose there's an option with a strike price of $80 a share. The underlying stock is currently trading at $75 a share. The option is selling for $1 a share. Say you sell your naked calls for $1 on 100 shares of the stock. Since you sell the calls, you're going to get $100 deposited into your brokerage account.

Now suppose the stock price rises to $85 a share. The calls you sold give the owner of the call option you sold the right to buy the stock from you at $80 since that was the strike price. You now have to go out and buy the stock for $85 a share since that's it's current market price, but the person buying the stock from you pays only $80. You lose $5 a share, BUT you already made $1 a share on selling the naked calls to begin with. You are NOT on the hook for the option because you already received the income from selling it.

So selling a naked call is LESS risky than simply shorting stock because you are receiving money when you sell the call option. You are not on the hook for both the option and the stock because you already received the income from selling the option. And selling naked calls requires less capital and assumes less risk than shorting the stock because the income you receive from selling the call option offsets potential losses if the stock rises in value.

In any case, the only profit that is made in selling naked calls is the money received when you sell the calls to begin with. You can't make any more than that initial premium no matter how low the stock drops.

[edit on 22-5-2007 by nick7261]

Originally posted by Pootie

Not so fast my friend. GOOG = $470/share buy... a THIRTY DAY $250/share put option is $0.15... YOU DO THE MATH... What if I knew they would "crash" this month? What is that leverage?

Of course options very far out of the money will have very low premiums, and could offer huge returns if the stock crashed. I already pointed this out on at least two posts.

Right. SOME options are able to be exercised for a longer term, HOWEVER, the vast, VAST majority are purchased for < 90 days. Admit that.

I have no idea when the vast majority are purchased for. LEAPS are pretty popular these days. That said, it doesn't matter when the vast majority are purchased -what matters is what was purchased pre-9/11. We have no idea what that was.

Originally posted by nick7261
Not true at all. Buying put options has less risk than selling stock short. When you buy a put option the most you can lose is the amount you paid for the option when you bought it. When you sell stock short your risk is theoritically infinite.

Wrong. With an option, if you see the trend, you just NEVER EXERCISE THE OPTION and LOSE all of your investment. With a short, if you spot the trend you can bail IMMEDIATELY. We disagree on the risk. If you are not paying attention, you may be correct.

You can't exercise an option and lose all of your investment. You can always reverse the initial option trade. If you bought puts, you can sell puts to cover your initial trade if the stock begins to trend up. Or you can just let the puts expire worthless and lose your total purchase price. People do this all the time. You can always bail immediately on an option just like you can on a stock.

The difference is that when you short a stock, your losses are potentially unlimited. When you buy a put, the most you can lose is the amount you paid for the put. So I'm not wrong to state that buying puts is far less risky than shorting stock. You control your risks by buying puts because you know exactly how much you can lose. And even if you watch your shorted stock closely, you can still get killed if it gaps up overnight.

What do you mean "not exactly"? The 9/11 Omission says a SINGLE ENTITY boutgh 95% on 9/9. Where is your confusion? YOU CAN'T SELL THE PUT OPTIONS IF THE STOCK IS SKYROCKETING.

I didn't understand what you meant by 95% in your first post. And of course you can sell the puts if the stock is skyrocketing. People do it everyday all day long. You would of course sell at a lower premium than you paid. Why do you think you can't sell the puts you just bought if the stock is going up?

EXACTLY. So, what was the impetus for buying 95% of the outstanding put options on AA?

The impetus is the same as with any one-sided option purchase -speculation. And it's a bit of a mischaracterization to keep referring to "95% of the outstanding options." Unlike stocks, there is no set number of shares. Option contracts are written to create new contracts that didn't exist before you wrote them.

And like I said before, buying puts is less risk than shorting the stock. You can only lose your initial purchase price with the puts. Your losses can be unlimited shorting stock.

Like I said, you DO NOT hedge a long term long with a short term put option... you are only REINFORCING the point that options are usually SHORT TERM.

Now you're really starting to show your inexperience with the markets. People hedge their long-term stock positions everyday with short-term puts. They simply buy the short-term puts each month for a lower premium. In fact that's the whole point of hedging with short-term puts -to buffer your portfolio against short-term down turns in the market.

Given statistics, trends and the secrecy involved a conclusion can be drawn.

Your posts seem very misleading and apologistic... No offense intended, but this is not normal fund manager or fax blast trading.

I'm not misleading or apologizing for anybody. I'm simply stating that without knowing the details of the trades there is no way a valid conclusion can be drawn that the purchases of the puts have some insidious connection to pre-knowledge of 9/11.

In fact, quite the contrary. If somebody had pre-knowledge of 9/11 there are countless ways they could have made millions of dollars without drawing any attention to themselves by buying puts on the hijacked airliners. Come to think of it, unless somebody wanted to really DRAW suspicion to themselves, buying puts on the airlines is probably the only strategy NOT to do if you had pre-knowledge of 9/11.

Nick, Pootie:
I have no idea what you guys are talking about except in the genearl sense. No, please don't explain it, I'll only feel guilty that I still can't say who's right on what. I am stepping around this mud puddle for the moment.

Everyone else:
I'm digging into some basic research on Put/call/naked call etc. options and the source material available to catch up. When I have a wortwhile opinion and summation or something I'll post it. In the meantime here are links to some of the pages I'm looking at (some provided already in this thread). Feel free to dig in yourselves.

Basic info on options for dummies like me:
www.swingtradingtips.com...
trader.snowseed.com...
www.theoptionclub.com...

9/11 Put Option articles:
SF Gate 9/29/01: "Suspicious profits sit uncollected."
Archive of many stories

From The Wilderness:
Flocco/Ruppert: Profits of Death part I
Flocco/Ruppert: Profits of death part II
Flocco/Ruppert: Profits of death part III
Ruppert: Krongard and UAL Puts

Center for Cooperative Research:
CCR: 8/6/01: first putswww.cooperativeresearch.org..." target="_blank" class="postlink" rel="nofollow">CCR 9/6-9/10/01: Airlines
CCR 9/6-9/10/01: WTC Tenants
CCR: 9/7/01: Al Qaeda behind the trades?

[edit on 22-5-2007 by Caustic Logic]

Originally posted by nick7261
Of course options very far out of the money will have very low premiums, and could offer huge returns if the stock crashed. I already pointed this out on at least two posts.

So, do you think these options:

1. were in the money. ($.90/contract)
2. Were long term. (Expired in Oct.)
3. Were a hedge???

October series options for UAL Corp. were purchased in highly unusual volumes three trading days before the terrorist attacks for a total outlay of $2,070; investors bought the option contracts, each representing 100 shares, for 90 cents each. Those options are now selling at more than $12 each.

This is just a simple small UAL example, remember the 9/11 Omission will ave you believe that this was recommended in some "fax Blast", newsletter, etc and MANY small timers just decided to become short term put options traders? look at the AA numbers when you get a chance.

Who wrote the newsletter and on what basis? A bad quarter?

Originally posted by Pootie

So, do you think these options:

1. were in the money. ($.90/contract)
2. Were long term. (Expired in Oct.)
3. Were a hedge???

No, no, and no. I didn't read the SFgate.com article until last night. Obviously if the options wer 0.90 they were far out of the money, and if they were Oct. options there were due to expire in about 6 weeks or so. And according to the news reports, they apparently weren't hedging a position.

This is just a simple small UAL example,

I'm not sure this is correct. It was my understanding that about 2,000 put contracts were written on UAL. If this is so, then this one trade would be the entirety of the put options in question.

remember the 9/11 Omission will ave you believe that this was recommended in some "fax Blast", newsletter, etc and MANY small timers just decided to become short term put options traders? look at the AA numbers when you get a chance.

Who wrote the newsletter and on what basis? A bad quarter?

Again, without knowing the strike price and the expiration, there's really no way to tell if this was a big-time, multi-million dollar trade or some small time investor plunking down a couple of grand on a whim.

But to get back to Caustic's original question about whether or not these option trades were that unusual, just take a look at a recent table of high volume options:



You can see that it is common for option trades to suddenly spike for a variety of stocks, for both puts and calls, and for both long and short term options. #15 on the table above has an increase in volume of over 56,000%!!!

Even a highly traded stock like PFE has an increase in volume of over 87,000% on long-term puts.

And look at the volumes... 27,000... 14,000... 10,000.... this puts in perspective the relatively low volume of airline puts that were purchased, which were in the range of 2,000 contracts.

So all in all, based on what we know, and based on comparing the airline options with the overall market, there's no reason to suspect anything THAT unusual. The UAL and AA put options were seemingly drops in the proverbial bucket in the big scheme of things.

I am not going to research trends on the stocks you have highlighted.

1. These options were WAY out of the money... a play expecting a big drop.
2. They were one month options... a play expecting the drop NOW.
3. Only $2,000 was spent because the options were so far out of the money that is ALL THAT NEEDED to be SPENT.

“… October series options for UAL Corp. were purchased in highly unusual volumes three trading days before the terrorist attacks for a total outlay of $2,070; investors bought the option contracts, each representing 100 shares, for 90 cents each. [This represents 230,000 shares]. Those options are now selling at more than $12 each. There are still 2,313 so-called “put” options outstanding [valued at $2.77 million and representing 231,300 shares] according to the Options Clearinghouse Corp.”

- Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United Airlines, but only 396 call options… Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these “insiders” would have profited by almost $5 million.

- On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls. Again, there was no news at that point to justify this imbalance;… Again, assuming that 4,000 of these options trades represent “insiders,” they would represent a gain of about $4 million.

- [The levels of put options purchased above were more than six times higher than normal.]

- No similar trading in other airlines occurred on the Chicago exchange in the days immediately preceding Black Tuesday.

- Morgan Stanley Dean Witter & Co., which occupied 22 floors of the World Trade Center, saw 2,157 of its October $45 put options bought in the three trading days before Black Tuesday; this compares to an average of 27 contracts per day before September 6. Morgan Stanley’s share price fell from $48.90 to $42.50 in the aftermath of the attacks. Assuming that 2,000 of these options contracts were bought based upon knowledge of the approaching attacks, their purchasers could have profited by at least $1.2 million. Merrill Lynch & Co., with headquarters near the Twin Towers, saw 12,215 October $45 put options bought in the four trading days before the attacks; the previous average volume in those shares had been 252 contracts per day [a 1200% increase!]. When trading resumed, Merrill’s shares fell from $46.88 to $41.50; assuming that 11,000 option contracts were bought by “insiders,” their profit would have been about $5.5 million.

- European regulators are examining trades in Germany’s Munich Re, Switzerland’s Swiss Re, and AXA of France, all major reinsurers with exposure to the Black Tuesday disaster. [FTW Note: AXA also owns more than 25% of American Airlines stock making the attacks a “double whammy” for them.]

...there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. In the case of at least one of these trades -- which has left a $2.5 million prize unclaimed -- the firm used to place the “put options” on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency.

Originally posted by Pootie

“… October series options for UAL Corp. were purchased in highly unusual volumes three trading days before the terrorist attacks for a total outlay of $2,070; investors bought the option contracts, each representing 100 shares, for 90 cents each. [This represents 230,000 shares].
Those options are now selling at more than $12 each. There are still 2,313 so-called “put” options outstanding [valued at $2.77 million and representing 231,300 shares] according to the Options Clearinghouse Corp.”

You've completely misinterpreted what this means because this article is poorly written. Follow the math here:

1) The investor buys $2,070 worth of put options at $0.90 a contract. This means the investor owns 2,300 option contracts.

2) Each option contract gives the investor the right to sell 100 shares of stock at the strike price. Let's say for the sake of argument this strike price is $12 a share. We'll get to this later...

3) The market drops and now the options that were purchased for $0.90 are now worth $12 a contract. The investor bought 2300 contracts, so his 2300 option contracts are now worth $24,840 (2300 x $12.00)

At this point the investor has a profit of $24,840 - $2,070 = $22,540.

4) The article's reference to the $2.77 million is not the worth of the options, but to the value the of stock the option contracts represent. In other words, the 2,300 put contracts give the investor the RIGHT to sell 230,000 shares of stock at the strike price -$12 a share in this example. That would equate to selling 230,000 shares x $12.00 and receiving $2,770,000 for the sale of the stock.

5) HERE'S THE IMPORTANT PART!!! The Investor Must Own the Stock Before He Can Sell It!!!

The investor never OWNED the shares of stock -he just owned the options which gives him the RIGHT TO SELL THE STOCK AT A CERTAIN PRICE. BUt he didn't own the stock, he just owned the options. In order to sell the stock, he would have to go out an buy 230,000 shares of stock.

So in order to sell the 230,000 shares of stock at $12 a share, he would have to first BUY 230,000 shares of stock at the current market value. The amount of money the investor would need to spend on buying the stock is going to be roughly $22,000 less than the money he gets when selling the stock at the $12.00 strike price.

In other words, the writer of the article was very misleading in only quoting the "value" of the options. The options' value was $12.00 a share x 2300 contracts. The value of the underlying stock that the options represented was $2.77 million, but in order to exercise the option to sell the stock, the investor would first have to buy $2.755 milion worth of stock.

- Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United Airlines, but only 396 call options… Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these “insiders” would have profited by almost $5 million.

This again may be misleading information. How was it derived that 4,000 put options resulted in a $5 million profit?

- On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls. Again, there was no news at that point to justify this imbalance;… Again, assuming that 4,000 of these options trades represent “insiders,” they would represent a gain of about $4 million.

Again, this claim that 4,000 options represents $4 million profit is not substantiated. If the 4,000 options were purchased for $4,000, and the stock dropped $10, the option profit would go to somewhere near $40,000, not $4,000,000.

You're not quoting a CT site as your external source, are you?

- [The levels of put options purchased above were more than six times higher than normal.]

Again, this is why I posted the table above. It's not unusual for options to trade at 10,000% their normal volume. 6 times normal volume is nothing extraordinary.

Assuming that 2,000 of these options contracts were bought based upon knowledge of the approaching attacks, their purchasers could have profited by at least $1.2 million.

Again, this is not substantiated. If 2000 contracts were purchased for $1 each, and the stock fell 5 points, the contracts might go up to $5. This would be an $8000 gain, not $1.2 million.

Merrill Lynch & Co., with headquarters near the Twin Towers, saw 12,215 October $45 put options bought in the four trading days before the attacks; the previous average volume in those shares had been 252 contracts per day [a 1200% increase!]. When trading resumed, Merrill’s shares fell from $46.88 to $41.50; assuming that 11,000 option contracts were bought by “insiders,” their profit would have been about $5.5 million.

Again, the writer of your source is using a completely incorrect method to determine the values of the options. He's basically pulling the $5.5 million out of thin air. The profit depends on how much was paid for the option contracts to begin with.

If 11,000 contracts were purchased for $10 a contract, and the option price went from $10 to even $20 on a 5 point drop in the stock, the profit is only $110,000, not $5.5 million.

...there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. In the case of at least one of these trades -- which has left a $2.5 million prize unclaimed -- the firm used to place the “put options” on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency.

Maybe I missed your source when I quoted your post. Where did you get this article from? It's looking like this entire estimated valuation of the profits is totally bogus.

Somehow the writer either mistakenly or intentionally overstated how much the options would be worth by simply substituting how much the underlying stock was worth without taking into account that the owner of the option would first have to purchase the stock in order to sell it at the option's strike price.

Using this writer's logic (or lack thereof) I could but the $1000 worth of the 0.90 GOOG options in your previous example and say that my options were worth $25,000,000.