Investor bets billions on huge market crash by 9/21

[C4talyst]

An anonymous investor has made unprecedented bets using put options that the US, Euro and Japan markets will all crash by 30-50% by Sept. 21. I don't know much about stocks but have found these reads intriguing. Perhaps those more knowledgeable than me can chime in:

Where it started:
http://www.tickerforum.org/cgi-ticke...-www?post=4669

News about the Euro bets:
http://www.financialnews-us.com/?pag...tid=2448565379

News report being spread around the Internet based on the analyst discussions in the first link:

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! This is really worrisome."

[Reefermadness]

WOWWWOO!!!!!!!!! Crazy!!!!!!!!!!!
Anyone here going to buy some put option? Easy way to buy new M3?

[561design]

Heh, according to the article. YOU may not be around to spend it.

[533ogetnom]

stupid shit like this pisses me off to no end, do the idiots that start these rumors have any idea what impact they would have if they actually, well, had impact

if it gained enough momentum and enough people bought into the bullshit a lot of people (including me) would lose a lot of money

i vote for this thread being deleted in order to not spread such trash around

[888]

Originally Posted by 533ogetnom

stupid shit like this pisses me off to no end, do the idiots that start these rumors have any idea what impact they would have if they actually, well, had impact

if it gained enough momentum and enough people bought into the bullshit a lot of people (including me) would lose a lot of money

i vote for this thread being deleted in order to not spread such trash around

+1

lets bring this up in October.

[ArmyBimmerDude]

It's the internet. What's the point of deleting it? You think we're the only ones that have seen this?

[561design]

Ok, if this thing is such a big hoax. Why is it so intriging to members of a stock market forum? Follow the link. You'll see that few of them are speaking out that this is not accurate.

[533ogetnom]

dude, i can find you a few people on the net that will argue for the apocalypse or anything else for that matter, its not hard

stupid shit like this actually can cause problems so drop it and dont even discuss it

[561design]

Originally Posted by 533ogetnom

dude, i can find you a few people on the net that will argue for the apocalypse or anything else for that matter, its not hard

stupid shit like this actually can cause problems so drop it and dont even discuss it

Why are you so concerned with dropping the issue here? It's on the internet. Most likely it's in places where people who are more directly involved are reading it. I'm just trying to understand why so few people are saying to drop it. An a majority of people seem truly concerned about it.

[bapow1]

Might this be someone from the Fed Reserve who is interested in making some money because of a force collapse of the market? Apparently the Feds did it twice before since the reserve was created.

http://www.zeitgeistmovie.com/ - Make sure you got about 2 hours on your hands before watching. It's a must watch for us conspiracy theorists out there.

One thing they missed in the movie is this http://www.informationliberation.com/index.php?id=15459

[Poderes1]

I see it as pure speculation. I do options trades myself and yes it is the way to go when it comes to making money in the market regardless of what direction it goes. I forsee the Fed lowering rates in the near future as early as the next meeting.

[achien]

That means the reverse may happen. When they need to cover their short position.

Originally Posted by C4talyst

An anonymous investor has made unprecedented bets using put options that the US, Euro and Japan markets will all crash by 30-50% by Sept. 21. I don't know much about stocks but have found these reads intriguing. Perhaps those more knowledgeable than me can chime in:

Where it started:
http://www.tickerforum.org/cgi-ticke...-www?post=4669

News about the Euro bets:
http://www.financialnews-us.com/?pag...tid=2448565379

News report being spread around the Internet based on the analyst discussions in the first link:

[fobunited]

I actually don't see the Fed lowering the rates in the September meeting.

However, if the article about this investor buying those options is true, he/she is placing a bet on historical performance.

Historically, September is the ONLY month in the cumalitive history of the S&P to have a negative return of more than 1%. Since 2000, the S&P has had a average negative return of 4% in the month of September.

If you think about it, there are a couple things about September that affects the entire economy as a whole. First, children go to school. This makes September a huge spending month, especially for parents who have kids going to college. They have college tuition to pay for, as well as back to school clothes, supplies, etc. Also, September is a huge month for wholesalers, wharehouses, etc. to start loading up their inventory in preparation for the holiday season. Because of all this spending, many companies and individuals have to liquidate some of their positions in the market to have cash available to spend. This generally leads to a market downturn in September, which picks back up in the following month because of huge consumer spending.

Since I'm on a BMW forum, another thing to consider are automobiles. Most new car models come out around the month of August/September, meaning more consumer spending, and more "old stock" inventory for car dealerships. Consumer spending DOES pick up the economy, but many consumers have to pull money from their equitiy investments to front the capitol. The positive effects of consumer spending takes awhile to show up on the market in the long run, and usually hits the market first.

That is not to say, however, that past performance is an indicator of future performance. That is a very dangerous game to play indeed. The fundamental indicators, however, do point to a general downturn in the stock market around the month of September. Also keep in mind whether the Fed lowers the rate or not is going to have a huge effect on the market, especially if they do not. The individual investor, playing off emotion and limited information, will see the Fed NOT lowering the rate as a bad thing, and many people will sell, further lowering the market. The Fed NOT lowering the rate, I believe, is a good thing, because it says the government firmly believes our economy is strong and capable of turning this slump around. September may very well be a good month to buy.

Sorry for the long post, those are my 2 cents.

[533ogetnom]

Originally Posted by 561design

Why are you so concerned with dropping the issue here? It's on the internet. Most likely it's in places where people who are more directly involved are reading it. I'm just trying to understand why so few people are saying to drop it. An a majority of people seem truly concerned about it.

because i get my entire income from investments and stupid shit like this is like fucking with my job which i dont appreciate (get the pun lol)

[iatacs19]

None of this sh1t matters if you are investing for the long-run.

[Kiemyster]

all i can say (in spanish accent): Terroristaaa!!!! TERRORISTASSS!!!!! AQI! AQI!!!

[jaiman]

guys, there's about a million different reason for someone to put on this trade besides the directional play.

there's also a ton of ways for him to hedge out the directional component of the trade.

i'd guess this has very little to do with a meltdown bet, and more to do with hedging an exotic options book, running a box trade to borrow money cheaply etc..

[fobunited]

You're saying you never reallocate your assets?

Originally Posted by iatacs19

None of this sh1t matters if you are investing for the long-run.

[nightkhan]

The following is the interpretation by Steve Smith at TSC earlier. Since he located the big counterparty in most of the trades, the explaination is more credible. The remaining question is which institute wants to raise this big amount, likely a hedge fund.

>>>>>>
Steven Smith
Dispelling the Bin Laden Trade
8/30/2007 2:22 PM EDT

Much has been made of the large and unusual, open interest that has appeared the S&P 500 index options as discussed in this morning's article and a range of online articles such as this that have the conspiracy theorists out in full force. Since it fell into the option domain, I would have been remiss in not reporting about it.
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.

Dan Perper, a Partner at Peak 6, one of the largest option market makers and proprietary trading firms, told me this morning that his firm was the counterparty to a good portion of the volume and position in question. "This was done as a package in which the box spread was used [as a] means of alternative financing at more attractive interest rates" explained Perper.

Simply put, two parties agree to trade the box at a price that essentially splits the difference between current rates.

For example, the rough numbers would be that given the September 700/1700 box must settle at a value of 1,000 -- it is currently trading around 997 -- that translates into a 5% interest rate.

For the seller it is a way to borrow money at a slight discount to the prevailing rate, and for the buyer, it is a way to lend money at a low rate of return, but it's better than nothing at a time when others are scared and have painted themselves into a box (ha ha) because they have run out available funds.

Currently there are about 63,000 700/1700 boxes open. Perper expects that once the September options expire, you will see similar boxes established in the December series. As to why the September 700 put has over 116,000 contracts open, Perper thinks a good portion of that was created from the prior rollover when April options expired.

But we'll leave open the possibility that some portion of that is owned by a guy wearing tin foil on his head and had an extra half billion dollars to spend.

[888]

Looks like some a$$-hole lost a lot of money!

[HyperM3]

Originally Posted by 888

Looks like some a$$-hole lost a lot of money!

+1. I hope people werent stupid enough to jump on that bandwagon.

[Badmaash]

well, Ill bet at the time they didn't think the Fed would cut the rates... stocks seem to be upheld by that rate cut.. but the census is that is just thin air and another correction is on the horizon. There are still a lot of problems in the credit markets