Mystery trader bets market will crash by a third!

Interesting articles on the put options that were placed against the European market. According to the article, the strike price(September expiration) is at a point where the market has to crash by at least a third for the investor, whoever it may be, to profit. This is the DJ Eurostoxx 50 that the puts are against, but needless to say, it would cause havoc here. The investor purchased 245,000 put options at a cost of $1 billion dollars. Who could it be. The following article thinks it is a hedge fund that may know about upcoming losses and protecting itself, or locking in profits because of the panic.

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

The next link talks about the same thing, but then brings up the point that the same thing happened before 9/11. Another interesting take.

http://www.prisonplanet.com/articles/august2007/270807_market_crash.htm

If it was to happen in such a short time frame, I think someone knows that some brokerage is about to blow up, or something else very big that would spread more panic. In this environment, there are only a couple types of companies I can think of that would cause that damage since we have already had so many companies blow up. That is one large bet though just to lock in your profits, especially with such a small time frame. I wonder if someone somewhere knows something?

John

>>The investor purchased 245,000 put options at a cost of $1 billion dollars. Who could it be

any comment on why anyone would be willing to take the other side of that bet?
the size of the purchase alone would drive up the implied volatility and skew the P/C ratios etc...
that's the kind of order that would come across and cause everyone to run instead of salivating for getting the fill on that order

-abb

I sure hope this is bogus. But there are a lot of internet rumors (see Juan Cole's website) re the US getting ready to attack Iran in early September. That might make a big short like the above worth the 'risk.' It might also explain why the short (if indeed it exists) was lodged against the European market, as that market would be caught in the crossfire and might plunge more than the US, at least initially. Here, sadly, many (at least 30% of the citizens) would be caught up in another televised 'light and fireworks' show and think the whole thing was a great idea. Let's hope for everybody's sake this is all just internet blabber.

I am personally not feeling too excited about the coming month as I have seen a growing number reports of massive options trades far out of the money.  Who is speculating on the worst?  For me, the answers to what potentially could crash the market to the levels of the trades are:

1. An impending very large terrorist attack on U.S. or European soil.
2. An impending U.S. strike on Iran.
3. A major financial institution blowing up (and I mean a really major one).

I really hope none of these take place and I am going to be wary throughout September given the reports I have seen.

If the worst does occur, I wish the entire Market Traders community the best in dealing with whatever hurdles may come.

Peace.
Kemp

fwiw http://www.thestreet.com/_email/newsanalysis/optionsfutures/10377063.html

Iran is coming very quickly me thinks! But then another attack is also likely. So is the pending economic crash. And He maketh an end of all nations.