Disclaimer: I don't know this site and I can't confirm what they are saying. But the apparently there were some HUGE amounts of money spent on options by a single trader (individual, company?) totaling about $2 billion. The trade doesn't make sense except if the market crashed big time. Options only start making money if the stock market goes down 30%. Timeframe is between now and Sept.

http://www.tickerforum.org/cgi-ticker/akcs-www?post=4669

Here's how a guy summarized the situation:

"1) August 22nd, someone wrote almost
$2 billion worth of calls that the market
will tank in the next 3-4 weeks.
Down by at least 30+%

2) The forum members think it's a huge
mistake by someone and it won't
"stick" over night.

3) Someone calls in some kind of options
hot line and guy confirms that it's legit,
not a mistake. Guy sounds really worried.

4) Aug 23 they confirmed that this huge
$2 BILLION CALL had indeed "stuck".

5) So, someone put a hell of a lot of money
on the line that the market will crash in
September. They are either incredibly stupid,
or know something we don't."



https://www.kitcomm.com/showthread.php?t=7957

Ok, this might be something. Do you know if the putoptions were spread all across the stock market or rather put in some specific trade/industry (construction, airspace, rail transport)?

Second thing is that some “strange” stock operations might be undertaken when the natural downturn takes place (just as we had it week ago), so not to raise our suspicion.

These are call options for the the S&P 500 index, so no particular industry.

Here's a link that shows the options. Notice that the large number of in-the-money call options (open interest on the left side for the calls at strike prices from 60 to 95). The SPY is currently at 146.

http://www.marketwatch.com/tools/quotes/op...s1.asp?symb=spy

Think of it this way. Looking at the 60 call for SPY, what are the chances that the S&P will drop to 600 by the 3rd week in Sept. when it currently is at a level of 1400? Pretty low chance right? So why would someone sell 10,000 options for this when the normal number would be about 200? And then they did it not only for the 60 strike price, but also 65, 70, 80, 85, 90, and 95. The only way you would make money on the 60 call, for example, is if the S&P dropped below 600 (ignoring time value for you puritsts). However, there have been some guessing that this is a hedge fund doing some weird short term money draw, but even if that's the case, they are probably going to lose millions or a billion on the trade. It's only a profitable trade if the market crashes, and only huge investors would be able to drop so much money on such a high-volume and unusual trade.

SO its not a specific company?

Wow, we need to keep an eye on this and find out more about it.

that's right. They are options on the entire stock market.

Just trying to be constructively sceptic, is it often that the investor is loosing his money as nothing happens?

Well, for each trade there's always a buyer and a seller, so someone always makes money and someone always loses. With options, since they expire over time, you can lose your "bet" if the market doesn't move the way you hoped in the right timeframe. So yes, lots of investor lose money if nothing happens. Whats odd about this is the gigantic bet. That's odd, regardless if they win or lose. It's like if you bought a $10 million insurance policy on your car. Seems a little excessive. The insurance company made a lot of from it, but you lost big time.

Some have speculated that this is some weird money-laundering scheme. Options (and stock) trading is supposed to be anonymous to traders (not to the guys who run the market). And it's not like you can pick who will be on the other end of your trade. However, at these extreme prices, you aren't going to find many investors, and at this volume I guess you would have a small number of people who would be willing to do the trade. But I think that it's unlikely for someone to use the market for money-laundering because it would just be really hard to control, and the guys who run the market can find out who the traders are pretty easily. Plus this is getting a huge amount of attention. But who knows.

I have a question buddy: Is this the same type of activity that was seen happening in the stock market just before 9-11-01? I think they called them "put" options....I'm not really sure what that is indicative of. I don't know as much about this particular aspect of 9-11 as I would like to right now.
But 2 billion dollars??? That is a MASSIVE amount of money.........

Just to clarify, these are not put options that someone bought (as in before 9/11). These are call options that someone sold. The end result is the same: huge betting that the stock market is going to crash (or possibly some other strange short-term money move).

And that is what I meant (sorry as I was not clear about my question). Is it often that someone puts billions on bet and looses his money?

Michal, I would hope not. Not too many people can even put up billions to lose, and I can think of no one who can lose billions and play another round.

It looks like what is happening is that someone has $2 billion worth of SPY (S&P indexes) and is selling call options against them to make their money right now because they don't think the S&P go up any more.

So it goes like this: I buy a bunch of SPY which are just index funds whose price is equal to the level of the S&P 500. I think that the market is going to drop between now and 3rd week of Sept. I can either sell my SPY's now, or I can use options. If I use options, I can SELL someone the right to BUY my SPY's. If I do that with calls whose strike price are in the money (meaning that the strike price is below current trading price) then I will make a lot of money. But what will happen is that by the end of Sept, the person I sold the calls to will exercise those calls and I have to sell him my SPY's at that those price we agreed to. But since I already made money from selling him the call (the right to buy them) even by selling them at a low price I get some money.

Here are some numbers:

I own 1 SPY. Current trading price is $140.

I SELL someone the right to BUY my SPY for $60 between now and 3rd week in Sept. (this is me selling a call against my SPY).

The sell price of this call is $80, which I get immediately when I make the trade to sell the call. So now I have 1 SPY, $80, and the liability to sell to the other guy my SPY at $60.

So fast forward to the 3rd week of Sept. If the price of the SPY is still $140, then the guy that bought my call is going to "call" it (exercise it) and is going to buy my SPY for $60. In the end it is all a wash: I sold a call for $80 and then sold my SPY for $60 when the price of SPY was $140. I break even. Same goes for the guy I was trading with. However, in real options trading it wouldn't break even.

But now imagine that instead at the end of Sept. the price of SPY was $90 (meaning, the S&P dropped to 900). I still have to sell my SPY to the other guy for $60 (the price set by the call option). Now I still made $140 ($80 for the sell of the call and $60 for the sell of the SPY) when the SPY is only worth $90. I effectively prevented myself from losing $50 ($140-$90). Why not just sell now? Well, that would be simpler, but you can actually save some money on the trade by doing it this way, and it wouldn't "move the market" meaning that because of my huge sell of SPY's it actually causes the price of SPY's to drop (maybe even before I was able to sell all my SPY's).

Now if the stock market were to go up, I would lose money because I already contracted with the other guy to buy my SPY at $60. So if the SPY goes up to $170, then I still have to sell the other guy my SPY at $60 (that's what price the call was for). So I made $140 ($80 for the sell of the call and $60 for the sell of the SPY) when the SPY is at $170, lost gains of $30.

Back to the real options trades in question: The fact that whoever did these trades at such extreme prices (the most in-the-money calls which are the highest priced ones, about $80 each) indicates that whoever did this wanted their money now, without moving the market, and wanted to get as much as they could get now versus later. This is not someone about to make a lot of money from a crash. This is someone cashing out now in a weird way to prevent losing a whole bunch of money. Not only that, this is someone taking a big risk in doing so.

I read the tickerforum's thread from start to finish, some interesting discussion and links offered there. Definitely something to keep an eye on. I'm worried.

I read the whole thing too. They sound worried...like it's the first sign that something really big is definitely on its way.
one guy even wrote this:

Guys, you better hope this is all bullshit.

That's a fucking Bin Laden trade. You know, the kind Bin Laden makes before he sets off something like this in a place we won't like?

If THESE guys are thinking this...... :huh:

OK, now we have to confirm it from some other source

Last I heard no one has claimed the put options that were placed on AA & UA before 911.
Is it possible this would be away to somehow claim this money through a scam like this one? Note: I don't know anything about the stock market so that might be a dumb question :D

There's something really wrong about the "no one claimed the put options" things before 9/11. You cannot trade options anonymously. You actually create an enforceable contract when you buy or sell an option. Somebody got caught with his hand in the cookie jar with those put options before 9/11 and somehow got everyone to just shut up about it and pretend it never happened. That is remarkable.

I am a trader don't hate on me for working on wall street.

Here are some basics about options trading.

First of all the option chain in question is the option chain for the SPY, which is an exchange traded fund, aka an "ETF". An exchange traded fund is like a mutual fund, in this case it is like an S&P index fund. It is something you can trade like a stock.

The fact that there is a large amount of open interest in spy puts does not mean that a single person has these opened options NOR does it tell you whether these options were bought or sold. Selling an option adds to the open interest.

So, anyway, what does a put option mean? Commonly in this context there is a lot of talk about how it is a bet that the market is going to tank. At this current point in time that is not such a radical notion, in fact take a look at any of the indices for the past month and you will see that the market has recently had a HUGE correction. This is the real estate bubble bursting, just as excellent economists such as paul krugman have been saying for quite a long while. Many fear that the market has much further to fall. I agree -- we have not seen the worst yet and that is entirely based on the bs lending binge in the housing market that has been going on for years. Real estate prices are insane right? well if you are thinking of buying a home, WAIT IT OUT.

That being said, I think everyone on this board should also understand that options trading is a VERY COMPLEX thing. It can be simple in concept of what an option is, but the strategies vary wildly.

I have many questions about everything but one thing for certain I have never really questioned is the "oddness" of the options trading in the airline stocks. Its not really odd at all.

The reason is this: if you buy a stock, what do you do if the stock goes down -- sell right? Well, hopefully you sold before you lost too much money. One of the primary tools for saving your ass if the stock you just bought tanks is that you will have bought in the money PUT options at the same time.

Notice on the marketwatch options chain that the options are cheap where the strike price is close to the current price of the underlying stock. Therefore, if you bought stock A for $100, and you also bought put options with a strike price of $100, and your stock tanks to zero, you can still sell at 100, for so long as the option does not expire. This is a reasonable and common hedge, it is basically buying insurance against a stock price decline.

One of the biggest ways to lose your ass though, is to sell what is called naked put and bet wrong. In other words, if you sold naked puts and the stock goes down, you're hosed. In a sold naked put you do not already own the underlying stock, so you have to purchase the stock and sell it at the strike price of the option. In this case if you were bearish, you got your ass handed to you because as the options seller you have to honor the contract and purchase stock to cover the difference.

The key to understanding whether or not the options trading surrounding airline stocks was betting on a market decline was to understand what strike price the options were bought at. I have tried to find out information on this but I tend to find nothing but "there was unusual amounts of options activity on UAL". This tells you absolutely nothing. What activity -- sold puts? sold naked puts? at what strike price?

Sorry if I got too technical with the trading jargon but given the most common scenario which I mentioned before, it sounds to me like some smart traders just covering their ass on a large buy. If it were an institutional trader, then even more so would be the reason to buy in the money puts because then you are working with other people's money, so even more reason to be less risky. As far as how "ordinary", one only has to look at any options chain, plot it against the daily average, and you will see that common average trading volumes are quite inconsistent all around.

So, can anyone point me to a listing of exactly what the nature of the put options were in the weeks preceding 9/11 because I have been quite curious but nonetheless, without knowing the rest of the options trader's portfolio or strategy, there is little to say on whether or not it is "odd" in any way.


been a lurker, this is my first post, and i geeked on options....damn

I wish I could have met you back in '94 when I was telling everyone to invest in Micro$oft..... Thats when I was "geeking" in computers and they finally got DOS right with version 6.22. ;)

Unfortunately I am still an ignorant idiot when it comes to the stock market.

Welcome to the forums nyctrader.

cheers mate...

yeah msft was a great pick back then and i still have it in my portfolio. never count them out, did you see that photosynth shit? that shit is cracked out man!

when i hear "no one claimed the put options" i take that to mean, no one EXERCISED the options. which means they let them expire. in any case when you place a trade you do it through your account so no matter what its not anonymous -- the answer to whether someone's strategy favored the ill ways of the world lies in knowing their portfolio, what their strategy was. the more i think of it the more i remember the world was in pretty good shape with a lot of air travel and a strong dollar, albeit the tech bubble at that time was done and we were kinda coasting a bit...the post 9/11 downturn was bound to happen as well no doubt. so given the trading strategy i mentioned before, whats odd is if those options were left unexercised... but the same person could have been hedging in a different way... hard to tell.

anyway not to rant but i really hate when people say that this option activity, whatever it was, was INSIDER trading. no, dammitt!!! insider means a very specific thing, you have to be registered differently and are subject to very strict sec regulations. here, for example since we are msft lovers on this board lol is the insider roster for msft: http://quote.yahoo.com/q/ir?s=MSFT -- this is not any old schmoe who can buy options, which means, anyone with an options account. the option trading is weird as i mentioned the inconsistency before but it is NOT "insider" trading!!!!!!

more strange options trades. This one does include puts and is in the $1 billion range.

http://prisonplanet.com/articles/august200...arket_crash.htm

Even if there is no crash or new 9/11, there are at least a few guys with a whole lot of money that are betting on it.

Alex Jones will be talking about this after the Aaron Russo interview today B)

Yeah the news is now up on Prisonplanet, listening to refeed of today's show.

I was a bit annoyed at Alex yesterday when a caller brought this up to him and Alex wouldn't listen and said it's just rumours, nothing to see here... Ah well, I'm glad they're talking about it now!

for now, a lot of words but no confirmation from mainstream media ... or am I wrong?

http://z10.invisionfree.com/Loose_Change_F...showtopic=14710