# Mystery trader bets market will crash by a third



## Temjin (9 September 2007)

I know I already made a post in another thread, but I thought I would get more attention here by starting a new thread. Sorry. 

http://www.financialnews-us.com/?page=ushome&contentid=2448565379



> Mystery trader bets market will crash by a third
> Renée Schultes
> 16 Aug 2007
> Carry trade unwinds as yen hits one-year high
> ...




Lots of other information here,

http://www.google.com.au/search?hl=en&q=mysterious+trader+put+option+dow&btnG=Google+Search&meta=

Geez, are we in for a market crash at last here? A huge bet against something like this isn't child play, someone got to know something is going to happen or he/she faces over $750million-$1 billion lost.


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## wayneL (10 September 2007)

I doubt this is any punt on a crash. This has already been dispelled for the US version of the option trades. I'm not saying the market won't crash, just that the trade is probably not a punt on it.

http://www.thestreet.com/s/terror-t...ysis/optionsfutures/10377063.htmlpuc=googlefi

Firstly, the strike price is WWWTFOTM (way way way the f*** out of the money). This is such a low probability trade it's ludicrous.

Secondly, there is always another side of the trade. Someone must sell the puts, so is the trade a buy or a sell. Likely it is not strictly either and probably hedged off and market neutral as per the article linked to.

Thirdly, who would be silly enough to do this now that it is so well known? If there was a massive terrorist attack, the trader would be the first suspect to be arrested.

No, I don't think there is anything sinister in it.


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## Miner (10 September 2007)

If market is to be driven by betting games then people like Warren Buffet and banks will not exist.
However there could be something hidden as many more impact to be seen in mid Sept.
DOW jones has plunged on Friday again.
Alan Kohler in Eureka Report virtually asked to hold breadth until 15 September.

If we know the answers then life would have no fun to say '"I TOLD YOU".

Let us pray it will be a win-win.

Regards


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## Nick Radge (10 September 2007)

I'm sure the answer is quite straightforward. I had a ball of a time back in 2000 and 2001 selling puts that were way out the money and being bought in large quantities. We found out the buyer was a Macquarie fund that stated in its disclosure document that they had to have a certain amount of short side protection. Every so often they'd come out and buy 4000 or so puts in the SPI about 500 points OTM. They almost always expired worthless. This is probably what is happening here and its probably been going on for a long time.


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## Temjin (10 September 2007)

Nick Radge said:


> I'm sure the answer is quite straightforward. I had a ball of a time back in 2000 and 2001 selling puts that were way out the money and being bought in large quantities. We found out the buyer was a Macquarie fund that stated in its disclosure document that they had to have a certain amount of short side protection. Every so often they'd come out and buy 4000 or so puts in the SPI about 500 points OTM. They almost always expired worthless. This is probably what is happening here and its probably been going on for a long time.




Yeah, it could be just a hedging tactic. The link to terroism is probably a coincidence because of the 9/11 anniversary? 

Regardless, while I am all cash, I do not want to see my parents' super value to shrink dramatically. I guess we will find out in the next few weeks.


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## Awesomandy (10 September 2007)

Temjin said:


> Regardless, while I am all cash, I do not want to see my parents' super value to shrink dramatically. I guess we will find out in the next few weeks.




At least the investments of your family as a whole are diversified.


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