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

QUOTE: "Either scenario is bad and the clock is ticking. The drop-dead date of these contracts is September 21. Whatever is going to happen MUST take place between now and then or the folks involved in these contracts will lose over $1 billion for having engaged in this activity."

If said "entity" is that powerful, then 1 billion dollars really isnt that much money especially as far as markets go. I wouldnt read too much into this at all. So what, some crack-pot (or pots) out there is willing to lose a billion bucks? Its a lot of money yes, but not so much to read into something very huge taking place. If it were a trillion then i would be scared. Billion- not so much.

ClintK:

As the buyer of the put, I'm only out the option price. Period. I can't lose more than that. Now, if I buy a LOT of options, I would be out some money, but I can't lose more than what I paid for the option.

As the seller of the put, I might end up having to purchase S&P indexes worth a fortune - my potential losses are nearly unlimited.

Let's turn the land example around - let's say I sold you a put option that allowed you to sell me 100 acres of land at $10,000 an acre. I make $10,000 from selling you that option. Land is now selling at $20,000 an acre. As the seller, I don't think that land can fall below $10,000.

Next week, they find a nuclear dump site on the 100 acres. Its value falls to zero. The buyer of the put option exercises it - and sells me, the seller of the put option, a million bucks of contaminated land.

The buyer of the put option can be out no more than the original cost of the put - $10,000.

But the seller of the put option can be out the value of the instrument below the strike price - 100 acres of zero value land at $10,000 an acre.

So the seller has reverse leverage - and is nearly always exposed to massive losses.

You have to have steel gonads to be a naked option seller.

[edit on 26-8-2007 by Tom Bedlam]

It's clear from the story that the interest in someone writing calls not buying puts.

Two different things.

well shouldn't we follow the leader. lets put a put option on it as well. maybe we will get rich and if you do. I get 10% for recommending it.

reply to post by djohnsto77


Which article? It looks like the anomalic research article has both the writers and buyers of the puts as betting that stocks will drop, while the tickerforum thread, at least the first page, has people commenting on the excess writing of calls and buying of puts, at least those are both in the correct direction for a stock drop, although writing calls is a much more emphatic statement in a belief that stocks are going down.

I am just referring to this"

There are 65,000 contracts @ $750.00 for the SPX 700 calls for open interest. That controls 6.5 million shares at $750 = $4.5 Billion. Not a single trade . But quite a bit of $$ on a contract that is 700 points away from current value. No one would buy that deep in the money calls. No reason to. So if they were sold looks like someone betting on massive dislocation. Lots of very strange option activity that I haven't seen before. I've been doing this about 25 years.

But yeah that site is all over the place.

Originally posted by St Udio

Originally posted by ClintK
I'm a little puzzled by what several posters have said now about how they (the investors who bought the puts). don't have much to lose.

let's use an anology.........

i used to go to the horse track,
whenever a race had a 'trifecta' available
And there were 6 horses racing - - -
one could place a Trifecta box for less than $250.00
and IF the Win-Place-Show horses paid more than the $250.oo invested
then you'd Win

[edit on 26-8-2007 by St Udio]

I understand what you're saying, but for that analogy to apply, the buyer would have had to buy an equal number of calls. It's basic hedging. This is not an uncommon strategy in a volatile market, or with a particularly volatile stock. But unlike horse races, sometimes you win both ways and sometimes you don't win at all. The options have to exceed their strike price in order to make any money at all. If they don't reach their strike price but come close, you might be able to recoup some of the money you paid for the contract, but you'd lose money.

On the other hand, the stock might exceed the strike price of your call a week after you bought it, in which case you'd exercise your call and make a profit (unless you thought it would go up even more, then you'd wait). Then, a month later, after you'd already made money on the call, the stock falls below the strike price of the put. Now you can exercise that option and make money on the falling price.

But in this case, there was not a corresponding purchase of calls, and the puts would only make money if the value of the whole index fund fell by more than 30 percent. Even under pretty bad market conditions it's crazy to bet the market is going to rise or fall by 30 percent in four weeks. The only time it ever did that was the crash of '29. The only other time it ever came close was Black Monday in 1987 (22 percent). But that was attributed to computer programs that automatically sold stocks when they hit certain levels and that problem was fixed.

So the investors who bought these puts are probably going to lose everything they paid unless they know something!

Look, would ANY of you buy puts on an index fund (not a single stock, mind you, an entire index fund) that expire in four weeks with a strike price more than 30 percent below what that index is at today? As near as I can see, that would be like throwing your money out the window.

reply to post by djohnsto77


That is odd - both writing deep in the money calls and purchasing them...

Hrm. Ok, here is the conspiracy theory. A pair of floor brokers in commodities can transfer money from one party to another by a trick of swapping tickets at the close, assigning the winning side of the trade to the contributee and the losing to the contributor. Thus may a politician suddenly become a "crackerjack commodity trader" with no experience and make money her campaign needs, while thwarting the contribution limits and taxes.

Might this be the same, only done on the stock floor? Who needs a tax-free contribution of 4.5 billion?

Originally posted by Tom Bedlam
ClintK:

As the buyer of the put, I'm only out the option price. Period. I can't lose more than that. Now, if I buy a LOT of options, I would be out some money, but I can't lose more than what I paid for the option.

[edit on 26-8-2007 by Tom Bedlam]

I understand that, Tom, but this guy/these people bought 65,000 contracts and the people buying the Eurostoxx 50 bought 245,000!

That's a ton of money, and they're basically betting the whole market is going to fall by better than 30 percent.

To me, that's incredibly risky, especially since you're talking about losing every cent you invested.

Originally posted by ClintK


I understand what you're saying, but for that analogy to apply, the buyer would have had to buy an equal number of calls.

which is very possible!


the shrewd player might make a sizeable 'bet' to skew the odds...
'
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.

it gets extremely convoluted with all the if's/and's/but's
and that is what the manipulators desire you to think, so you wont tag along



[edit on 26-8-2007 by St Udio]

I'm sure most of you have done your research with 911 stock options with the airlines,and as much as I try not to make assumptions about anything thats not concrete. It seems many stocks are inflated anyway, with many insider trades

we all know that bush wants to invade IRAN, I know something is up with something happening soon. In order to invade IRAN we need another terror attack, and if that happens then the stocks will fall. It dosn't seem plausable that the stocks would fall without an attack. I wish we had an honest government that was based on democracy, but its been a monopoly for many decades, look at enron. History repeats itself, thats a fact.

so as i read all 5 pages and learned a good deal , i have some questions.

what is the level of concern that

St udio, clink k , dhjonsto and tom bedlam have regarding these stock options being bought.

is it really a big deal?



[edit on 26-8-2007 by cpdaman]

Operation Noble Eagle is actually a operation under Operation Garden Plot which was implemented in the 1960's during the civil rights movement. It is used to train national guard in crowd control and civil unrest.

Operation Garden Plot is a general U.S. Army and National Guard plan to respond to major domestic civil disturbances within the United States. The plan was developed in response to the civil disorders of the 1960s and is now under the control of the U.S. Northern Command (NORTHCOM). It provides Federal military and law enforcement assistance to local governments during times of major civil disturbances.

Garden Plot was last activated (as Noble Eagle) to provide military assistance to civil authorities following the September 11, 2001 attacks on the United States.

Under Homeland Security restructuring, it has been suggested that similar models be followed.

"Oversight of these homeland security missions should be provided by the National Guard Bureau based on the long-standing Garden Plot model in which National Guard units are trained and equipped to support civil authorities in crowd control and civil disturbance missions."

The government only needs crowd control if something happens to make the citizens of this country unruly..........Is a enconomic recession, Iran war or terrrorist act going to happen soon?

The question we should ask ourselves, is some anonymous guy truly is betting that much money on a market crash? Can we confirm someone truly is doing that, or all we got is that nebulous information?

If someome truly is betting that much on that, then something will definitely happen. We shall wait and see. Yay, action?

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]

reply to post by ClintK


Well China had 9.7 billion of dollars link to the housing markets, they denied since July that they had any money invested, but as the markets started to slow down China lost money and many of the stock holders didnt' know anything about the involvement so they were not very happy.

China could be one of the players because they are already link to American companies they have been doing it in secret until now.

Industrial & Commercial Bank of China Ltd., the world's largest bank by market value, said it had $1.2 billion of subprime-related securities.

Well, I'm sort of hoping for a "big computer error" that triggered the thing, but that's not likely.

I can't figure it. Why write them, and why buy them, that far in the money?

It's skullduggery or totally staggering stupidity.

Or someone's transferring a lot of money to somewhere or someone and doesn't want to pay taxes on it - maybe.

Originally posted by ClintK
The S&P 700 are also all non-American.

Yes but for the umpteenth NOBODY is talking about the S&P 700!!!

The reference is to S&P 500 (SPX) call options with a strike price 700. That's where 700 comes in.




[edit on 8/26/2007 by djohnsto77]

If there is an attack I don't think it's CHINA, I don't think it will be IRAN I think its all the banks in the world, they control everything. They have the power and like a game of monopoly they know whats going to happen. Its just an equation. Does anyone have the evidence to prove this post?

whoa! this is disturbing indeed, a big thumb up and a flag... this is serious.
Before all the naysayers get in here and light up the thread calling "doomsday hoax" and what not, I would like to take a second to focus on the key point and lay this out in simple terms, these put options are not (from what I understand) based one one single stock like the 9/11 put options, these are for the entire index of the SPX 500.. someone correct me if I am wrong on that.

What does this mean?
These put options are based on the assumption that the financial system is going to take a huge plunge, in a certain amount of time. Not just one company is going to take a hit from this, everyone will... regular people like you and I. So, if we use history as a guideline and refer back to the put options before 9/11 we can only assume that something bad is going to happen.. in maybe more ways than one.

I know it has been stated before, but this could all be tied to a false flag scenario of some sort, so what do we know about the timeline of this? Do we know without a doubt that there will be operations (homeland security/military/etc) going on in september? What are the possibilities?




(edit to reflect correct index)
S&P 700

[edit on 26-8-2007 by telemetry]