Something To Worry About?

[AlexLah]

Anyone here heard about this?

http://www.anomalicresearch.com/optioncall.html

http://www.tickerforum.org/cgi-ticker/akcs...4669&page=8

Not only in the US but in EU as well.

What is going on?

Alex

[torrenova]

Remember though that options are traded until maturity and thus if the market moves the right way and the original buyer can sell on his options, he will make money even though those options are still out of the money.

[midas]

Remember though that options are traded until maturity and thus if the market moves the right way and the original buyer can sell on his options, he will make money even though those options are still out of the money.

Yes that is true but as the articles say - doesnt the size of these trades

attract interest / cause some concern ?

[torrenova]

I'm not going to investigate the normal size of that market and check the validity of these trades but why is no-one interested in who is writing these options ? Who is collecting the call payments ? Over what time were the trades put on. What is / is not being hedged ? What are the real prices for so far out of the money options.

Does anyone still use TOTEM ?

Has anyone bank access to Bloomberg and their options modelling pages ?

Sorry but I've been out of the investment bank game for a few years and I have no accurate up to date knowledge of volumes on those options.

I'd look at other cals in that range as well as puts and calls and futures prices for September. We need far far more information than one isolated piece.

[midas]

I'm not going to investigate the normal size of that market and check the validity of these trades but why is no-one interested in who is writing these options ? Who is collecting the call payments ? Over what time were the trades put on. What is / is not being hedged ? What are the real prices for so far out of the money options.

Does anyone still use TOTEM ?

Has anyone bank access to Bloomberg and their options modelling pages ?

Sorry but I've been out of the investment bank game for a few years and I have no accurate up to date knowledge of volumes on those options.

I'd look at other cals in that range as well as puts and calls and futures prices for September. We need far far more information than one isolated piece.

The headline says :-

BILLIONS IN PUT OPTIONS PURCHASED BETTING THAT THE MARKET WILL CRASH BY 9-21 BY 30-50%??! (Bin Laden Trade??) ***

Nothing mentioned about call options

[sonicdragon]

I'm not going to investigate the normal size of that market and check the validity of these trades but why is no-one interested in who is writing these options ? Who is collecting the call payments ? Over what time were the trades put on. What is / is not being hedged ? What are the real prices for so far out of the money options.

Does anyone still use TOTEM ?

Has anyone bank access to Bloomberg and their options modelling pages ?

Sorry but I've been out of the investment bank game for a few years and I have no accurate up to date knowledge of volumes on those options.

I'd look at other cals in that range as well as puts and calls and futures prices for September. We need far far more information than one isolated piece.

The headline says :-

BILLIONS IN PUT OPTIONS PURCHASED BETTING THAT THE MARKET WILL CRASH BY 9-21 BY 30-50%??! (Bin Laden Trade??) ***

Nothing mentioned about call options

There is a lot mentioned about call options in the tickerforum thread link.

Personally I don't think you can get too carried away by volume and open interest in traded options. While it is interesting, there simply isn't enough information to make any informed judgement.

[lannarebirth]

I'm not going to investigate the normal size of that market and check the validity of these trades but why is no-one interested in who is writing these options ? Who is collecting the call payments ? Over what time were the trades put on. What is / is not being hedged ? What are the real prices for so far out of the money options.

Does anyone still use TOTEM ?

Has anyone bank access to Bloomberg and their options modelling pages ?

Sorry but I've been out of the investment bank game for a few years and I have no accurate up to date knowledge of volumes on those options.

I'd look at other cals in that range as well as puts and calls and futures prices for September. We need far far more information than one isolated piece.

Looks like about 3 call options for every 2 put options. Furthermore, the puts shown on the website seem to be way out of the money. With the VIX where it is now, someone paid a ton of premium for those.

http://stockcharts.com/h-sc/ui?s=$CPCE&p=D&yr=1&mn=0&dy=0&id=p36491078199&a=39591891

The headline says :-

BILLIONS IN PUT OPTIONS PURCHASED BETTING THAT THE MARKET WILL CRASH BY 9-21 BY 30-50%??! (Bin Laden Trade??) ***

Nothing mentioned about call options

[AlexLah]

Am I correct in thinking that if the market does not drop 30% or near 30% the investor will loose 4.5 billion USD?

They buy put's on a whole index fund that means they are betting the whole market will collapse?

S&p and Eurostoxx are made up of non US companies does that mean this investor is betting that the EU market will collapse first and the US market a bit?

65.000 S&P

245.000 Eurostoxx

Another strange thing I do not understand is why recently governements in US and EU were pumping billions of dollars in the banks.

Did the banks ran out of money?

If for example 90% of people took out their money from their accounts incase of some catastrophic event happening, what would happen?

If something big would happen that affects the stock market in a very negative way I for sure would sell all stocks I have as quickly as possible.

A lot of strange things are happening behind the screen that is not reported in mainstream media, maybe better to sell now?

The link to anomalic research is very confusing and to me it seems they have things mixed up.

Where is Dr Naam when you need him, ha ha ha

[midas]

Am I correct in thinking that if the market does not drop 30% or near 30% the investor will loose 4.5 billion USD?

They buy put's on a whole index fund that means they are betting the whole market will collapse?

Yes the thing about options is that it has to happen by the expiry date.

They can reduce their losses if they have the physical stock which

corresponds to the PUT options and if the stock goes up then that

reduces their exposure / losses on the puts. That way the Put options

are like an insurance premium.

Or they could take out a corresponding number of Calls in which case

they have a spread. But this is a huge trade and as lannarebirth

said they paid a lot for those

[sonicdragon]

Am I correct in thinking that if the market does not drop 30% or near 30% the investor will loose 4.5 billion USD?

They buy put's on a whole index fund that means they are betting the whole market will collapse?

S&p and Eurostoxx are made up of non US companies does that mean this investor is betting that the EU market will collapse first and the US market a bit?

65.000 S&P

245.000 Eurostoxx

Another strange thing I do not understand is why recently governements in US and EU were pumping billions of dollars in the banks.

Did the banks ran out of money?

If for example 90% of people took out their money from their accounts incase of some catastrophic event happening, what would happen?

If something big would happen that affects the stock market in a very negative way I for sure would sell all stocks I have as quickly as possible.

A lot of strange things are happening behind the screen that is not reported in mainstream media, maybe better to sell now?

The link to anomalic research is very confusing and to me it seems they have things mixed up.

Where is Dr Naam when you need him, ha ha ha

Market parcipants buy options for all kinds of reasons - it is not necessarily a simple bet that the market will go down. Many options are bought/sold for hedging purposes, not speculation. But yes, the holder of options that expire out-of-the-money will lose the premium that they paid. Of course there is nothing stopping them from exiting these positions before expiry whether they are in the money or not.

Yes, of course if there was an attempt to withdraw 90% of funds from the banking system the system would collapse.

Cental banks injected money into the system recently because the short-term credit markets seized up due in large part to fear among financial institutions stemming from the current US sub-prime problem which in turn stems from the US housing slow down and a re-rating of the value of associated loans . To some extent it is true that many institutions that had "borrowed short and lent long" had run out of money.

[Carmine6]

Anyone here heard about this?

http://www.anomalicresearch.com/optioncall.html

http://www.tickerforum.org/cgi-ticker/akcs...4669&page=8

Not only in the US but in EU as well.

What is going on?

Alex

I love it, the 9/11 conspiracy folks are now commenting on financial markets. Clicking through those links at anmalicresearch site leads to a lot saner commentary.

CNBC is carrying a story now. Looks like they read those conspiracy theory boards Note the less alarmist $500 million instead of billions (which referred to the notional value being controlled not the actual cash spent), and the less than catastrophic decline for most of them to be in the money. 5% - 11%. Now that they brought it up, it might be worth a look as some insurance. I'm long term bullish, but I also put the odds on a Fed rate cut at lower than the market thinks, so those days between the Fed meeting and the put expirations could be volatile.

Full story:

http://www.cnbc.com/id/20461003

More Investors Are Betting On Major Selloff in Stocks

Topics:Economy (U.S.) | Stock Market

By Jim Kingsland | 27 Aug 2007 | 03:42 PM ET

Font size:

Not everyone on Wall Street is convinced that the worst is over.

In fact, some investors are betting tens of millions of dollars that the market is headed for a selloff--a major selloff.

The reason: worries about a worsening credit crunch, along with speculation that the Federal Reserve may defy expectations and hold off on cutting interest rates at its Sept. 18 meeting.

So far, over $500 million in in so-called put options have been purchased betting that the benchmark Standard and Poor's 500 index will tumble anywhere from 5% to 11% in September. Some investors are even buying put options calling for 52% decline. A "put" option increases in value as the underlying stock or index falls...

[Naam]

Where is Dr Naam when you need him, ha ha ha

counting clink... clink... clink... nearly 50% cash, sip... sip... sipping a Port and puff... puff... puffing a Habana.

joke aside, that i hold more cash for a longer period of time (and planning to keep on holding it) has nothing to do with the two months old crisis and any foresight. it just happened and coincided with my strategy to build up cash in half a dozen currencies. i still hold 50 HY-bonds but all of them reduced in value. did i mention that i don't touch shares?

[Naam]

Not everyone on Wall Street is convinced that the worst is over.

neither am i!

[lannarebirth]

Going into Mondays trading there was about 1.5 times the open interest in index and equity calls as there was in puts. With volatility such as it is, there is a huge premium to be paid for options right now. Even if the market moves in your direction you may still not make any money. It looks like the puts in question are well out of the money. Almost never are worth anything come option expiry.

[Naam]

If for example 90% of people took out their money from their accounts incase of some catastrophic event happening, what would happen?

the quota is much lower. in fact even 25-30% withdrawals would cause a breakdown.

[lannarebirth]

did i mention that i don't touch shares?

Me neither doctor. It's like magic beans sold by carnival barkers. Insiders do pretty well though.

[Naam]

did i mention that i don't touch shares?

Me neither doctor. It's like magic beans sold by carnival barkers. Insiders do pretty well though.

do insiders eat better food than you and me?

[LaoPo]

did i mention that i don't touch shares?

Me neither doctor. It's like magic beans sold by carnival barkers. Insiders do pretty well though.

do insiders eat better food than you and me?

That's interesting, Gents....

If nobody would touch shares....would you still be making money ?

And, Doc, I don't know what you ate last night but I had a very nice dinner but I'm sure you had as well....

LaoPo

[lannarebirth]

did i mention that i don't touch shares?

Me neither doctor. It's like magic beans sold by carnival barkers. Insiders do pretty well though.

do insiders eat better food than you and me?

That's interesting, Gents....

If nobody would touch shares....would you still be making money ?

And, Doc, I don't know what you ate last night but I had a very nice dinner but I'm sure you had as well....

LaoPo

I imagine we're all eating pretty darn well, Lao Po. As for stocks/shares, I'll just say this: The public seems to have an ever increasing appetite for risk, while at the same time being seemingly oblivious to what their absolute returns may be.

Here's another take on the big put position:

http://www.financialnews-us.com/?page=usho...ntid=2448565379

Edited August 28, 2007 by lannarebirth

[AlexLah]

did i mention that i don't touch shares?

Me neither doctor. It's like magic beans sold by carnival barkers. Insiders do pretty well though.

do insiders eat better food than you and me?

That's interesting, Gents....

If nobody would touch shares....would you still be making money ?

And, Doc, I don't know what you ate last night but I had a very nice dinner but I'm sure you had as well....

LaoPo

The market has to drop by only 2-3 % per day

I imagine we're all eating pretty darn well, Lao Po. As for stocks/shares, I'll just say this: The public seems to have an ever increasing appetite for risk, while at the same time being seemingly oblivious to what their absolute returns may be.

Here's another take on the big put position:

http://www.financialnews-us.com/?page=usho...ntid=2448565379

[niebla]

This is a contrary indicator which means that when many people "bet" the market wil go lower, it usually goes much higher. Just my opinion.

[Lil_Jon]

just to rephrase the old value gurus , " Be Scared when the herd is buying , Load Up when they are selling " ........... time to load up the bargains i presume .......

[lannarebirth]

just to rephrase the old value gurus , " Be Scared when the herd is buying , Load Up when they are selling " ........... time to load up the bargains i presume .......

I didn't see any selling to speak of. No margin calls, no forced liquidations. Looked like a 40 week cycle low. The thing is though, this is a 4 1/2 year cycle low we're looking for here. The weekly chart isn't even oversold yet, let alone the LT chart. So, if this a bottom, I can't give it much longer than October to exhaust.

Where's the "blood in the streets":

http://stockcharts.com/h-sc/ui?s=$SPX...id=p16493422714

Edited August 30, 2007 by lannarebirth

[bingobongo]

Bin Laden' Options Trades Have Wall Street Whispering

As if the mortgage-market meltdown isn't enough to spook investors, some market players are worrying about unusual options bets that some observers have dubbed "Bin Laden Trades."

http://www.thestreet.com/s/bin-laden-optio...tml?puc=_tscfoc&

Edited August 30, 2007 by bingobongo

[lannarebirth]

Bin Laden' Options Trades Have Wall Street Whispering

As if the mortgage-market meltdown isn't enough to spook investors, some market players are worrying about unusual options bets that some observers have dubbed "Bin Laden Trades."

http://www.thestreet.com/s/bin-laden-optio...tml?puc=_tscfoc&

It's just a big credit spread trade. No big deal.

[Aujuba]

Casinos are doing well around the world it seems. They are building lots. I wonder who is more willing to take a risk: someone who has nothing to lose or someone who has something?

It's now or never some say. For many aging individuals in the US, when they take a look at their pensions and savings they soon realize that they are going to be slaving away into their 70s and 80s unless they make some money, some how, anyway they can and soon!

Do most investors know how to move their money in and out of their mutual funds? People with lots of money do but the small investors just put it in and leave it. Do your relatives back in the west move their money in an out with major movements of the market? I doubt it. Most trust their fund managers to do the right thing. I lost about 30 percent of my mutual funds values back in 1997. I just let the fund managers do their job. Ha Ha. Mutual fund managers don't always do the best. Sometimes an individual investor makes the better choice. Most average people still trust their fund managers.

The last great depression wasn't a one day crash. The market went down over a long period of time. Just because things look good this week doesn't mean that the big picture is really a long slow decline.

[lannarebirth]

Casinos are doing well around the world it seems. They are building lots. I wonder who is more willing to take a risk: someone who has nothing to lose or someone who has something?

It's now or never some say. For many aging individuals in the US, when they take a look at their pensions and savings they soon realize that they are going to be slaving away into their 70s and 80s unless they make some money, some how, anyway they can and soon!

Do most investors know how to move their money in and out of their mutual funds? People with lots of money do but the small investors just put it in and leave it. Do your relatives back in the west move their money in an out with major movements of the market? I doubt it. Most trust their fund managers to do the right thing. I lost about 30 percent of my mutual funds values back in 1997. I just let the fund managers do their job. Ha Ha. Mutual fund managers don't always do the best. Sometimes an individual investor makes the better choice. Most average people still trust their fund managers.

The last great depression wasn't a one day crash. The market went down over a long period of time. Just because things look good this week doesn't mean that the big picture is really a long slow decline.

Well, there are lots of ways to have a decline. You could leave an index in the same place for eight years, while undergoing 3%/year inflation, while having your currency devalued 35%. It's like boiling a frog one degree at a time. They hardly notice for awhile. Oh, and don't forget the taxes you'll pay on any returns.

Edited August 31, 2007 by lannarebirth