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

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?

In the market, timing is everything:
Cheney Orders Media to Start "Selling" War with Iran
Hmm... Cheney is saying 2 week media push to demonize Iran.
Isn't that about the time when these put options should mature?

Coincidence?

reply to post by HempRules


Is a nice video about two hours long that shows how the NWO has come to be, it tells the names of the families involved at least the descendants still following their ancestors dreams and how wars had been used for them to profit.

Federal Reserve $31.250 Billion lube job today...Gee! How about that?

Time to take a serious look at pawnshop stocks

reply to post by OBE1


No wonder the markets looked better today at opening, got to keep the finance elite afloat so they can save their butts.

Originally posted by OBE1
Federal Reserve $31.250 Billion lube job today...Gee! How about that?

I saw that!

I also saw this on the iTulip forums today:

Our Fed contacts, while indirect, indicate that the suddenness of the impact of the mortgage industry on the economy is not fully appreciated. ...

A well respected asset manager wrote today in a private note to clients:

"Have the Fed's moves been successful? Our review of market liquidity conditions since the inception of the liquidity crisis on August 9 clearly shows that liquidity conditions have not improved in most of the affected short-term markets, despite the Fed's recent actions. In fact, market liquidity problems have since spread to other sectors, such as short-term municipals and auction rate preferreds. The current liquidity crisis could be much worse if it were not for the prevailing market expectation of an impending ease in the Fed Funds rate. What will the Fed do?" - source

Both Canada and the European central bank have decided to leave interest rates untouched this week. I guess they are waiting to see what the Fed will do before making their next move.

Also, I just posted this news: Is China Quietly Dumping US Treasuries?
.

and then we get the most recent terror scare for 9/11/07 which would give the markets ample time to crash, be put in lockdown mode and reopen to further downward spirals

www.abovetopsecret.com...

reply to post by K-illuminati


Do you still stand by your statements?

Could you give more detail?

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?

reply to post by Rockpuck


market crash 1929 - Black Tuesday
market crash 1987 - Black Monday

Originally posted by Crakeur
reply to post by Rockpuck

 

market crash 1929 - Black Tuesday
market crash 1987 - Black Monday

Well I know that.

What I mean is that currently its always on a thursday or friday it seems that the markets are dropping so low, and after the weekend on monday its like it never happened. Past several weeks have been like this..

If the markets dropped because of employment/job creation then you would think the over the weekend announcement that Country Wide was going to lay off more then 12,000 more employees would cause the markets to drop further, especially since this will most likely carry over into other financial institutions.

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.

reply to post by Rockpuck


Yes I noticed that too, for since the month of July it has become a trend, but is because the overnight infections that the fed and other banks are doing to keep it looking good on the beginning of the week.

While these put options have been given alternative, "innocuous," explanations that don't necessarily point to impending gloom & doom, the S&P Put remains -- in my estimation -- the clearest evidence that parties are betting the worst is happening this month.

As I stated earlier, the puts may have been hedges on the possibility that the Fed will infact not cut rates, as they see the risk of a stock market fall the lesser of two evils (the second being hyperinflation as a rate cut will devalue the dollar further, sending cash holders to dump the dollar, trashing our fiat currency to where it may just be cheaper to burn your cash in a fireplace this winter than to use your heater).

There is a second -- and in fact a compounding -- reason for the down bet. Some may be betting that more financial houses and hedge funds will fold soon after the 17th as the latest round of short-term asset-backed commercial paper (a majority of which is shouldered on the floundering and devaluing real estate market) comes due. Suddenly, these funds and groups will have to come up with the money to pay these high interest debts -- and given the credit squeeze are unable to sell their crappy paper debts to finance that demand.

So, in short, we may see a rash of major bankruptcies and investment fund closings later this month, which will no doubt panic the market.

the pressure is rising since there is a spike in the funding calendar each month, around the 17th, when a large amount of paper expires. Since commercial paper settles two days after it is issued, this means funding for September 17th (next Monday) will probably be concentrated this Thursday.

Dealogic estimates that in Europe just over $50bn of ABCP matures over the next week, while $109bn-worth of paper matures during September.

The Financial Times has detailed a good nuts-and-bolts story on ABCPs.

Just another possible scenario to go gray over....

reply to post by xenya


The $650 is for each contact. If the trade was for $4.5 billion in underlying stock, then we are talking about 3 million contracts(Index was at 1450 I mistakenly typed SPY instead SPX, but the point is the same. SPY is just the ETF representing the SPX and trades at 1/10th the price of the index.

Bottom line is that this was not an all or nothing bet. Money will be made or lost in increments about double the amount the index changes. I still believe the contract will end up being a push, as it appeears the whole trade was only to provide liquidity to some big brokerage or hedge fund.

SPY Options

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.

Originally posted by disgustedbyhumanity
reply to post by xenya

 

The $650 is for each contact. If the trade was for $4.5 billion in underlying stock, then we are talking about 3 million contracts(Index was at 1450 I mistakenly typed SPY instead SPX, but the point is the same. SPY is just the ETF representing the SPX and trades at 1/10th the price of the index.

Bottom line is that this was not an all or nothing bet. Money will be made or lost in increments about double the amount the index changes. I still believe the contract will end up being a push, as it appeears the whole trade was only to provide liquidity to some big brokerage or hedge fund.

SPY Options

So, then explain this to me, does that mean that there's an aggregate of $1.95 billion on the table? Plus, the next expiration date we're seeing is Oct. 7, so what exactly expires in the middle of the month?

reply to post by behindthescenes


You are correct with the 1.9 billion ( or around there).

Both the futures and the options on the SPY expire on Sep 21st. They always use the third Friday of the month for expiration. So again you are correct.It is in the middle of the month.