New Terror Attack Gearing Up?
Posted: Thu Aug 30, 2007 8:55 am
This was a blip that caught my eye this morning:
'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."
The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month. Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won't pay off unless the market undergoes an extremely large price move between now and the options' expiration on Sept. 21.
The positions in question have left option industry experts perplexed to come up with a rational explanation for the trades, which are far from the best or most efficient way to profit from what would be outlier events.
Those worrying about the worst-case scenario are recalling that large put contracts were placed on airline stocks, notably American, a unit of AMR and United Airlines, in the weeks leading up to the Sept. 11, 2001 terror attacks.
The first area of focus is that open interest on September 700 S&P puts is 116,000 contracts, an unusually high number for such a low-probability trade. A put is a defensive bet that gives the holder the right to sell a security at a specified price, in this case more than 50% below the S&P 500's current level of 1463 as of Wednesday's close.
Rest of story here: http://www.thestreet.com/_htmlbtb/newsa ... 77063.html
Hat tip: www.thestreet.com:
'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."
The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month. Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won't pay off unless the market undergoes an extremely large price move between now and the options' expiration on Sept. 21.
The positions in question have left option industry experts perplexed to come up with a rational explanation for the trades, which are far from the best or most efficient way to profit from what would be outlier events.
Those worrying about the worst-case scenario are recalling that large put contracts were placed on airline stocks, notably American, a unit of AMR and United Airlines, in the weeks leading up to the Sept. 11, 2001 terror attacks.
The first area of focus is that open interest on September 700 S&P puts is 116,000 contracts, an unusually high number for such a low-probability trade. A put is a defensive bet that gives the holder the right to sell a security at a specified price, in this case more than 50% below the S&P 500's current level of 1463 as of Wednesday's close.
Rest of story here: http://www.thestreet.com/_htmlbtb/newsa ... 77063.html
Hat tip: www.thestreet.com:
