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All Aboard Riverboaters!!!

Submitted by RobotTrader on 09/23/2009 14:49 -0400

Gambling Fever is now reaching exponential proportions, proof positive in today's Wall Street Journal, outlining how Bucket Shop traders are gunning stocks like AIG. Even the former superbear Damon Vickers is now running one of these daytrading shops, pumping stocks like AIG with outlandish $300 price targets.

Here are some excerpts from that article...

Hilarious!!!

American International Group Inc., a symbol of
the financial crisis, has morphed into a
playground for speculators.

At a traders meeting before the
market opened on Monday, Scott Redler, chief strategist at hedge fund T3 Capital
Management, noted that AIG's stock hadn't moved much for days and was ripe for
a breakout. Whether it headed up or down, he said, the traders should be ready.

AIG shares, trading below $40 at the
opening bell, climbed within 15 minutes to $41, then above $42. "This
thing's going to $45," T3 President Marc Sperling said, watching his six computer monitors.
"It's on every trader's radar screen across the country."

AIG shares rose 21% for the day, and
T3's traders did "great," said Mr. Redler. Since Aug. 5, the shares
-- deemed highly risky by most analysts -- have more than tripled. "The
stock paid the traders' bills all summer," Mr. Redler said.

AIG, arguably, has been the biggest casino of all. In the past seven weeks, its
common shares have careened between $13 and $55, surging past $54 on Tuesday
before closing at $45.80.

Trading most actively between short-term traders, who buy and sell
based on market momentum and bet
against each other in risky options trades. Often they use borrowed funds,
amplifying their gains and losses.

Alex Herrera, head of Soldier
Capital LLC, a 26-member day-trading
firm in Ramsey, N.J., has been among those buying and selling AIG. A former
floor trader on the New York Stock Exchange, Mr. Herrera says he often trades
blocks of 100,000 shares, using funds he borrows through the firm to make bets
of as much as 15 times the size of his
portfolio.

On some days during the past month,
AIG trading volume topped 130 million shares -- nearly equaling the total
number of existing common shares -- up from less than 10 million a day in early
August. Trading by firms such as Soldier Capital is "one of the reasons
you're seeing all this volume," says Mr. Herrera, 40 years old.

In the days after the split, traders
like Kenneth Glick started betting the shares would fall. Mr. Glick, 37, works
for Bear Capital Partners, a tiny day-trading
outfit that operates from windowless offices in lower Manhattan.

Staring at his computer, Mr. Glick
shorted roughly 2,000 shares of AIG, selling borrowed shares with the intention
of replacing them with cheaper shares if the stock declined. Like most day
traders, he didn't hold onto his short positions overnight. He says he made
about $1,000 from AIG trades in the week following the split.

On July 9, he posted a video on
YouTube. "AIG shouldn't even be a stock," he said, calling the
company "finished." In the video, Mr. Glick disclosed that he was
shorting the stock.

But the bulls prevailed. The next
day, AIG closed at $11.74, up more than $2. On a Yahoo message board devoted to
AIG, anonymous posters said the shares were heading up -- with one predicting a
$300 share price in three years.

By mid-July, AIG's stock had become a tinderbox. Professional traders watch
message boards as a barometer of investor sentiment, and monitor stocks for
changes in buying patterns. Should the share price begin to rise, they
believed, the many speculators who shorted the stock would have to buy the
shares they had pledged, sending prices even higher. One more surge in AIG
shares would ignite a fierce rally, traders say.

That spark came on Aug. 5, the day
after AIG named a new chief executive, Robert Benmosche, a retired banker and
insurance executive with a solid reputation in the insurance industry.

Within the first two hours of
trading, shares surged 25% to $17. On message boards, posters speculated that
former American Express CEO Harvey Golub would join AIG. (He later did, as the
board's nonexecutive chairman.) There was talk on trading floors that AIG and
the U.S. would strike a deal to cut down the debt the company owes the government.

The latter hasn't materialized. But
AIG's shares closed up 60% on the day, at $22.

Trading volume in AIG options
exploded on Aug. 5 to 380,000 contracts, up from 10,000 or 20,000 in prior
weeks. Trading was especially heavy in out-of-the-money call options, where the
strike prices -- ranging from $25 to $35 -- were far above AIG's current share
price. In other words, buyers of such contracts were betting on big price
jumps.

The strategy promised big profits.
Traders who bought the August $30 calls on Aug. 5 could have more than doubled
their money by the time the contracts expired.

Some day traders and brokers took
bigger risks. They sold such options naked -- without buying the stock they
might be required to provide should AIG shares hit the strike price. It was a
risky bet that the shares would fall.

Among those who made these wagers
was William Lefkowitz, an options strategist at vFinance Investments in New
York. On Aug. 5, he says his phone lines were jammed with calls from clients.

"I'd put someone on hold to
finish a conversation with a client who wanted to buy [options on] AIG. By the
time I got back to the first client the stock would have jumped three points,"
he says. "It was amazing -- a dream for a person who wanted to
trade."

Mr. Lefkowitz says he believed the
stock would decline, so he proposed a bearish play: His clients would sell call
options with the hope that they would pocket the buyer's premium if the
underlying stock failed to reach the strike price. He made the same bet
personally. Like many of his clients, he sold the options naked.

"You want to do this when the
stock is going up and things are exciting," says Mr. Lefkowitz. In this
case, the risky play worked: The options expired before AIG shares hit $50,
letting Mr. Lefkowitz pocket a fast $500 without having to deliver the stock.

More traders chafed to get in. At
Nine Points Management & Research, a hedge fund whose investing style
involves jumping in after a stock
catches fire or breaks sharply lower, manager Damon Vickers rued sitting on the sidelines. "It was
ridiculous we missed the first move," Mr. Vickers recalls saying in an
August huddle with his partners. "This is what we watch for."

On Aug. 20, AIG shares surged anew
amid bullish comments from the new CEO, Mr. Benmosche.

The rally created a panic for
traders who had sold naked call options on AIG shares with a $30 strike price,
believing the stock never would hit that level. Now these players scrambled to
buy AIG shares so they could meet their obligations. This drove shares still
higher.

The rising price attracted more
people who bet the stock would fall. On Aug. 20, 12.5 million shares were sold
short through the Nasdaq -- 47% of the exchange's AIG volume. But shares kept
rising, closing above $32.

Mr. Vickers, meanwhile, got his
second chance. The fund manager grabbed the stock on Aug. 26, when AIG shares
rose to nearly $38 from $34. The next day, in a moment that hearkened back to
the fervor of the technology-stock boom, the fund manager appeared on
television, predicting that AIG shares
could hit $300.

The chat rooms were jammed with
investors trying to decipher what was happening. "Did CNBC say $300 per
share?" read one comment.

As the stock moved toward $50 on
Aug. 28, messages grew frantic. "Buy, BUY, BUYYYYYYY!!!! AIGGGGGGG,"
read one. "Shoot for the $77 today with [impending] News," read the
next message on the same board.

That day, trading volume in AIG
shares soared and the stock hit a closing high of $50.23.

On the options market, traders began
betting that the stock would fall in coming months, possibly even back to
single digits.

By Sept. 1, AIG shares had sunk to
$36. Mr. Vickers at Nine Points says he got out at a small profit.

Manhattan day trader Mr. Glick, once
bearish, began buying, darting in and
out of AIG over the course of the day. By mid-September, he had lost most
of the $1,000 he made earlier shorting the stock. "AIG has caused me nothing
but heartache and pain," Mr. Glick says now.

Stock of the Day:

Grubb & Ellis...

Some "enterprising speculator" made 50% in one day gunning this one..

- advertisements -

Wed, 09/23/2009 - 15:00 | 77563 Thurgy

You comedy makes my day Robo.

Wed, 09/23/2009 - 16:23 | 77699 deadhead

I liked you from day one when I read your stuff, Andy.

I like you even more now lol!

Wed, 09/23/2009 - 20:15 | 77996 D.O.D.

I'm kinda partial to Steph...

http://www.youtube.com/watch?v=JGJXNOy2blo

Wed, 09/23/2009 - 16:24 | 77702 mkkby

Now I'm too distracted to trade.

Wed, 09/23/2009 - 17:51 | 77829 snorkeler

yummy!

Wed, 09/23/2009 - 15:09 | 77574 ratava

Careful about quoting so much from one wsj article robo. They are known for being massive c... about that, suing even Google News for linking to them.

Wed, 09/23/2009 - 15:28 | 77605 Beauclerc

My blood boils when I read about AIG...I hope people are making tons of money off this POS. Its amazing how many CNBC Chahi's there are yelling recovery!..do these people ever get out of the office let alone go and walk the strrets of the US....we got problems...BIG ONEs

Wed, 09/23/2009 - 15:48 | 77624 Anonymous

hear, hear

Wed, 09/23/2009 - 18:14 | 77868 Anonymous

Yep. We're farther from reality now than in 2007. But I'm sure it'll end well, just as it always does.

Wed, 09/23/2009 - 15:57 | 77642 Anonymous

Uh-Oh. The riverboater's couldn't gun SPX past 1080 today, even with the chairman vowing to print money until the presses melt down. Looks like SPY topped right at 108, volume picked up all to the downside.

I guess now that 'the recession is over' and 'AIG to $300' calls are in, it is time to get short!

Wed, 09/23/2009 - 16:05 | 77660 Anonymous

I thought naked shorting was illegal?

Wed, 09/23/2009 - 16:07 | 77661 primus

Uh-Oh. The cadre of riverboat gamblers couldn't gun the SPX past 1080 today, even with the chairman vowing to print money until the presses melt down. Looks like SPY topped right at 108. All the volume was to the downside. I guess now that 'the recession is over' and 'AIG to $300' calls are in, it is time to get VERY short!

Wed, 09/23/2009 - 16:19 | 77685 Tyler Durden

Robo, i think this is what the 19 year old momos are drinking these days:

Wed, 09/23/2009 - 17:03 | 77754 DBLTapViper

LOL -

Wed, 09/23/2009 - 19:15 | 77934 Anonymous

Laughing to hard to t-t-t-t-type !!

Wed, 09/23/2009 - 16:29 | 77717 Uber Villian

It's a shank or be shanked riverboat.

Wed, 09/23/2009 - 16:45 | 77729 Hephasteus

$300 dollar AIG. It's rediculous to put artificial limits on this stock. It's going to the MOON. I'm calling the top. It's OVER 9000!!!. Yes you heard me. Over 9000!!!! They produce money which every else uses to produce stuff. The entire world will be producing AIG pyramids to house the dead bodies of the Gods who run it.

Wed, 09/23/2009 - 16:52 | 77740 Anonymous

Right about now, the Fed and Treasury should be concerned about taming the bubble they are nurturing - without raising rates. As I've stated esewhere, the final rally before the plunge peaked at 13,136 on May 19/08. So, 50% Fibonacci retracement from 6,469 low on Mar 6/09 is 9803!

If your a follower of social moods in markets, have a good look at our country and it's economic future... hilarious, yet sad:
http://www.youtube.com/watch?v=lUPMjC9mq5Y

-vreporter

Thu, 09/24/2009 - 00:30 | 78199 Anonymous

that video makes me think of the dark ages. like we're sinking into a morass of medieval ignorance, hubris, and superstition.

egad!

Wed, 09/23/2009 - 17:17 | 77775 RobotTrader

Heh, I was out of the office the last 2 hours of trading.

Looks like the market had another "psycho day" after the FOMC...

Wed, 09/23/2009 - 21:36 | 78057 Gilgamesh

Your lack of sugar today will be forgiven if you work RAX into your next post.

Wonder if the momo traders that end up holding on too long to all this Dash for Trash will soon feel like 'Cornelius' waking up to find Marla Singer in their kitchen.

Wed, 09/23/2009 - 17:53 | 77832 snorkeler

Like watching a terminally ill man and betting on when he will expire.

That's where its gotten to I guess.

Wed, 09/23/2009 - 18:33 | 77894 Ned Zeppelin

Oil dropping also could be triggered by a dollar move to the upside (or perception that it has turned the corner), could it not? A crisis would gun the SPY south as well as fearful folk turn en masse to the solace of Uncle Sugar. Gold can't buy nukes. Stay tuned.

Wed, 09/23/2009 - 18:48 | 77910 Hephasteus

I'm really wondering how close the meltdown is. Gold is simply NOT playing. They want it hammered down to 958 like a good little boy and it won't budge.

Wed, 09/23/2009 - 19:31 | 77956 Anonymous

At last, some skinny brunettes.

Wed, 09/23/2009 - 21:27 | 78048 Grand Supercycle