# US$2 Billion Put options betting market crash



## 123enen (25 August 2007)

This is a little (way) over my head but I thought you guys might enjoy it!!


http://z10.invisionfree.com/Loose_Change_Forum/ar/t14413.htm

BILLIONS IN PUT OPTIONS PURCHASED BETTING THAT THE MARKET WILL CRASH BY 9-21 

Posted By: RayelansMailbag 
Date: Friday, 24 August 2007, 6:34 p.m. You can see why banks are running scared...they know the bottom can fall out at any moment. I'd suggest keeping minimal deposits in banks and holding on to cash. 

ANOTHER HUGE SALE OF OPTION CONTRACTS 

Date: Fri, 24 Aug 2007 19:43:25 GMT 

Good Morning Everyone, 

OTHER THAN THE EXPECTED FINANCIAL ANNOUNCEMENTS, ANYBODY HAVE A CLUE 
AS TO WHAT THESE 'INVESTORS' ARE EXPECTING? 

**************************************************************** 

THEY DID IT AGAIN. . . . ANOTHER HUGE SALE OF OPTION CONTRACTS ON $4.5 
BILLION WORTH OF STOCKS BETTING THE MARKET WILL LOSE 30%-50% OF ITS 
VALUE IN FOUR WEEKS! 

THIS SALE ON THE SPY.X AND THE ONE FROM YESTERDAY ON THE SPY.Y 
(MENTIONED TWO STORIES BELOW) ARE BEING REFERRED-TO BY FOLKS IN THE 
MARKET AS "BIN LADEN TRADES" BECAUSE ONLY AN ACT OF TERRORISM AKIN TO 
9-11 (WITHIN THE NEXT FOUR WEEKS) COULD MAKE THESE OPTIONS VALUABLE. 

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. 

The entity or individual offering these sales can only make money if the 
market drops 30%-50% within the next four weeks. If the market does not 
drop, the entity or individual involved stands to lose over $1 billion 
just for engaging in these contracts! 

Clearly, someone knows something big is going to happen BEFORE the options expire on Sept. 21. 

THEORIES: 
The following theories are being discussed widely within the stock and 
options markets today regarding the enormous and very unusual activity 
reported above and two stories below. Those theories are: 

1) A massive terrorist attack is going to take place before Sept. 21 to 
tank the markets, OR; 
2) China, reeling over losing $10 Billion in bad loans to the sub-prime 
mortgage collapse presently taking place, is going to dump US currency 
and tank all of Capitalism with a Communist financial revolution. 

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. 

------------- 

"$1.78 Billion Bet that Stock Markets will crash by third week in September 
Anonymous Stock Trader Sells 10K Contracts on EVERY S&P/Y "Strike" 
Shorts Stocks "in the money" effectively selling all his SPY holdings 
for cash up front without pressuring the market downward 
This is an enormous and dangerous stock option activity. If it goes 
right, the guy makes about $2 Billion. If he's wrong, his out of pocket 
costs for buying these options will exceed $700 Million!!! 

The entity who sold these contracts can only make money if the stock 
market totally crashes by the third week in September. 

Bear in mind that the last time anyone conducted such large and unusual 
stock option trades (like this one) was in the weeks before the attacks 
of September 11. 

Back then, they bought huge numbers of PUTS on airline stocks in the 
same airlines whose planes were involved in the September 11 attacks. 
Despite knowing who made these trades, the Securities and Exchange 
Commission NEVER revealed who made the unusual trades and no one was 
ever publicly identified as being responsible for the trades which made 
upwards of $50 million when the attacks happened. 

The fact that this latest activity by a single entity gambles on a 
complete collapse of the entire market by the third week in September, 
seems to indicate someone knows something really huge is in the works 
and they intend to profit almost $2 Billion within the next four weeks 
from whatever happens!


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## wayneL (25 August 2007)

There may not be anything sinister in this. But interesting... looking into it.


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## Pager (26 August 2007)

You would have thought that if it’s only a single entity that has done this then the CIA/FBI and just about every US and British security agency would be having a serious look at who is behind it and what there connections are.

I can’t see there is anything to it, assuming the worst and someone or a group of people know there is an imminent attack about to happen that could be devastating I don’t think they would be so stupid to take such huge trades that stick out like a sore thumb.

Dont these type of rumours surface every year about this time ?, followed by the iminent October crash rumours ?.


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## dubiousinfo (26 August 2007)

123enen said:


> Clearly, someone knows something big is going to happen BEFORE the options expire on Sept. 21.
> 
> THEORIES:
> The following theories are being discussed widely within the stock and
> ...




If there was anything sinister to this (and I dont think there is) the APEC summit in Sydney from Sept 2 to 9 would have to be a prime contender. Dubya is in town for 3 days of it.


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## Nick Radge (26 August 2007)

Here is a comment I made to subscribers back on 9 August regarding the US Indices:



> In the ASX-200 analysis a few nights ago I mentioned that there was an alternate bullish picture possible in the local market and that we should always be looking for an alternative argument to the one currently being put forward. Let's take a look at a few things here for consideration. Firstly the US authorities did not think interest rates needed to be lowered a few nights ago. If lowering interest rates is considered bullish, then not moving rates is considered neutral or possibly, in this environment, bearish. Yet the market went up. I have said before that when the market doesn't do what it should theoretically do, then something else is going on and you'd better be listening. The next point of interest relates to the amount of call options and put options being traded. This is called the put/call ratio and is used as an contrarian indicator. Whenever this ratio is heavily skewed to one side, we can assume that the crowd is also skewed that way and if the crowd is usually wrong then you can bet the market will move back the other way. In this case, the ratio of puts to calls is at record levels. This means that everyone is thinking the market will fall. Assuming that the "herd is always wrong" theory stands true, and that the crowd have been buying puts at record levels, we can assume that the market will most likely rise. You know the last time the put/call ratio was this high? March this year. What followed? A 4-month rally. It would take new highs for confirmation, but something to ponder amongst the doom and gloom.


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## nioka (26 August 2007)

I doubt this is for real. Sounds like an April 1 joke to me. Someone with a sense of humour has started something to keep us occupied over the weekend or maybe they want to buy cheap on monday. Where is the evidence that this has happened.


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## Awesomandy (26 August 2007)

Ever since about the middle of last week, a lot of insiders have been betting on a market crash. Why? I don't know. But then, I wouldn't worry too much about that. If the market goes up a bit next week and hits the stop losses, you'll see those options coming back out onto the market, and then being bought by the late comers who also believe the market will crash. I would be very suprised if anyone is to hold on to so many options of any kind until expiry.


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## explod (26 August 2007)

Whilst we pontificate lets look at some possibilities.

A lot of fundamental information coming out of the US is downright bearish to say the least and it is backed by tangible evidence.   Most bullish sentiment from my observations are not qualified by evidence...... just trust me type reassurance.

Now lets look at the Dow Jones weekly chart for the last decade.  Hit a top six weeks ago and looks poised on the top of a rollercoaster.    If it were to fall in the next week or so by another  15% and break major support at about11000 then the next target would be the support at 8000 and our man with the puts would be well in the money.

The rises in the stockmarkets over the last year or so have been unbelievable for many, the falls may do the same;   however in the bigger picture this scenerio is well within the realms of the next month of two

Not saying it will pan out, but lets look realistically at all sides.   1927/33  was worse than this idea and some say with good argument that the financial dynamics are worse this time


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## hacheln_mice (26 August 2007)

Puts bought during panicky periods usually expire worthless.  The p/c equity ratio chart pretty much sums things up:


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## sails (26 August 2007)

I noticed some unusually large activity in ANZ September $22.50 puts on Friday.  Total of volume of 741 and open interest increased by 711 contracts.  

What we don't know is who is long and who is short on those contracts, so it really doesn't help much with direction.  We also don't know if one or both sides of these transactions may hedged with shares or another derivative which can completely change the nature of a seemingly simple put trade.

ANZ's put/call ratio for September is also skewed to the put side as explained in Nick's post.


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## explod (29 August 2007)

With the move on the Dow since our discussion a few days ago it is worth thinking about our trader of the Puts.

As highlighted on other threads we are now looking like a confirmed down trend on the main indices and we all know "falling is faster than the climb"

Next major support on the Dow 11000, then 8500 and our put trader is on the money.

The news out of US continues to get worse.


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## profithunter (29 August 2007)

sails said:


> I noticed some unusually large activity in ANZ September $22.50 puts on Friday.  Total of volume of 741 and open interest increased by 711 contracts.
> 
> What we don't know is who is long and who is short on those contracts, so it really doesn't help much with direction.  We also don't know if one or both sides of these transactions may hedged with shares or another derivative which can completely change the nature of a seemingly simple put trade.
> 
> ANZ's put/call ratio for September is also skewed to the put side as explained in Nick's post.




I wouldnt read to much into the ANZ contracts, the total cost was $24000.


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## wayneL (31 August 2007)

wayneL said:


> There may not be anything sinister in this. But interesting... looking into it.



Adam Warner (ex options market maker) basically coming up with same view... tin foil hats off for now. 

http://adamsoptions.blogspot.com/2007/08/conspiracy-theories.html



> Anyway, lots of tin-foil-ish chatta about some big open interest in SPX deep (and far OTM) options. Steve Smith and Aaron Task run it down on TheStreet.
> 
> 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."
> 
> ...


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## dubiousinfo (31 August 2007)

Here is another view on the puts that suggests there is nothing sinister.

Looks like I can cancel the food order for my underground bunker.  




> Dispelling the 'Bin Laden' Options Trades
> 
> By Steven Smith and Aaron L. Task
> Staff Reporters
> ...


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## wayneL (31 August 2007)

Mystery solved.

Via Adam Warner:



> Steve Smith solves the S&P options mystery.
> 
> But I'm glad to now be able to confirm that this was not a cloak-and-dagger situation. It was the least glamorous of the scenarios, the box-spread trade, that explains and is the catalyst for the activity.
> 
> ...


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