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The Other Plunge Protection Team: 122,017 December SPY $95 Puts
Not much commentary needed. Last night open interest was 28,197. Volume so far: 122,018. 122,000 lots = 12,200,000 shares - at around $95 each - that is a $1,159,000,000 notional trade
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Hmmm... Seems like many others don't expect these phoney levels to hold for more than a month or two either.
VIX spot vs Oct, Dec is very wide. More evidence of deep, deep scepticism.
Everyone sure sounds bearish.. but is anyone riding this monster up.. with a nervous trigger finger on the exit ???
I've been selling SSO Puts since late April -- working very nicely.
Yeah, I'm holding what I haven't sold. How's that for words without meaning? Mostly China microcaps that are ultra-speculative and volatile no matter what, so I always have a hair trigger - even in calm waters. That said, I'm > 50% cash at this point, so maybe that doesn't quality as "riding up." I think S&P likely goes through 1000 before any serious retracement.
Riding a monster is fun right up till the point it decides to KILL YOU!
buying SPY and DIA calls every day at 2:30 or so and selling them the next day or the day after.
Sit down at the computer at 2 pm, JPM paints the tape, we get the morning pump, I go in the money, take my profits at 10am.
Is the dollar correlation with the SPX finally breaking a bit? Anyone watching this?
10yr yield up, dollar up, S&P holding. Hm.
The FX mkts have been leading the indicies lately. Could mean the SPX is about to fall seeing the EUR fall an entire penny.
The inverse USD/CAD is the best correlation to the SPY I can find.
Can't post a graph here, but maybe someone can make it and link.
"Risk trade" currencies rejecting new highs here (except the Kiwi, it;s been nudging a little above, before this afternoon's smackdown).
http://stockcharts.com/h-sc/ui?s=fxa
http://stockcharts.com/h-sc/ui?s=fxb
http://stockcharts.com/h-sc/ui?s=fxe
http://stockcharts.com/h-sc/ui?s=fxc
Some of this might be related to ObaminationCare being postponed and possibly killed.
seems to be...either that or its a god sign the top is setting in..stock market will pull back an dollar with strengthen...
all hell will be breaking loose when the dollar weakens and the market drops at the same time (as opposed to the re-inflation trade ongoing now)...any extended run of that means things have changed for the worse...
I've counted 3 days this year of the unholy shit your pants trifecta of falling bonds, equities and $. Me = nervoso
ps...here's some good music while we wait for the next radio zero: http://www.youtube.com/watch?v=MfFrB0_Zic4
And 240,000+ at 82.00.
spread trade...August 92/Dec 95 put spread traded 120,000. SPY Aug 80/Dec 82 trades 240,000x. Vol has moved up a click.
yep...was gonna post almost this exact note. (AUG 80/92s rolled to DEC 82/95 2:1)
By my calculations, that total trade cost them just under $100,000,000.
depends on if it was for a debit or credit. most likely a debit very wide, and being a ratio total debit of $20,280,000..but obviously just guessing as to what i would do.
Rumor on the street is that GS rolled up a 1x2 and out to Dec
sorry, but what does that mean?
Fear of the Dark...
Can you explain rolled up a 1X2 and out to Dec for me please...
Briefly; they have purchased one call option and financed it by selling two. Its playing the spread.
you mean puts
lol, sorry, forgot that was the contract in discussion...
I'm no options master, so I need more of an explanation than this -- please!
Are we to interpret this as a blow-out top? Sure feels like more of an irrationally-exuberant bubble to me!
An institutional buyer as present by Reuters Here (http://www.reuters.com/article/marketsNews/idINN2339093420090723?rpc=44) bought 120,000 puts at $95 strike and sold twice (240,000) puts at $82 strike, both for december. This is a bear put spread, that the investor thinks that the SPY will be below $95, but hopefully above $82 by december.
I think he paid $5.3 for the $95 puts and received $4 ($2 times twice the volume) for the $82 put sold. His cost is $1.3 (5.3-4) X 120,000 puts X 100 (1 option = 100 shares) = $15.6 Million
If SPY is higher than $82 by 3rd week of December he than starts turning a profit at anything below $93.7 (95 - 1.3). If say SPY @ $85 in December profit would be $8.7 per option (93.7 - 85) X 12,000,000 shares (what 120,000 options represent) = $104.4 Million (not bad hehe) And then Goldman has best 3Q earnings, again, after stealing $104.4 Million from John and Bob who watch CNBC and want to get in this nice stock market rally.
Great explanation, thank you. Even a bone head like me gets it.
Vertical Q's....vertical, baby, vertical.
Yeah, and we're on the 12th floor now. It's a long way down.
Speaking of which, I went to Six Flags yesterday. They have a new roller coaster named Wall Street. It only goes up.....at least so far.
ROFLMAO!!!!
LOL! I laughed and laughed at that! Thanks for the humor!
Not to worry. When the car goes off the top, you just fall on the ever increasing pile of worthless Six Flags paper. THAT could cushion any fall.
Y! is showing 240,120 puts at the $82 strike, open interest was aboutt 12k. Looks like speculation to the downside is high.
Just went short!..
Shhhhh, GS might be eavesdropping.....
:-) Hoping they will push it higher for my REAL entry!
OR
Did I really go long on the pullback?
no need to parade, they knew your trade before you executed it
re Euro/usd - there was a big digital option expiry around 1.42 - I reckon that has just cleared causing that vacuum just seen - on another matter - USD/JPY in a world of it's own!!
Just a question. Is this sh@t really happening? I know it has been discussed and discussed here but how in the hell are we at 9100 in the DOW. For me and all around me things have only gotten worse and worse over the year. Of course I live in Las Vegas and until Feb09 was living in So. Cal. so is it just me? Is the rest of the country getting better and I'm just in a bad city? Another question I've often pondered. When the dollar devalues, does this come out as inflationary in the stock market. In other words is the relationship btn dollars and equities the same as the relationship btn dollars and bread -- as the dollar devalues it requires more of them to buy such asset.
I'mmmmm OOOOUT! Tricky to trade.. still very strong up!
I know, it is completely mad, just read some of the earnings reports and just wonder what is going on?
this market isn't a 'stock' market... it is GS and their program trading and that's it...
Craaazzzzy world. no jobs, no goods being produced, two bullshit never ending wars, bankrupt cities, counties, states. . .DOW 20k here we come.
I guess because I don't work for the banks I'm the naive one. Seems to me its a house of cards on a sand foundation. Glad the rich are getting richer though
Yeah sure. The market can go to anything you want it to be, in dollar terms. The questions is how much can you buy with those dollars (inflation.....). If S&P 500 is 10,000, but an ice cream is $79 are we better off ??? The S&P went up 10 times, but the ice cream went up 50 times. If you don't like the ice cream analogy, just use something else, like rent for 1 bedroom in Vegas for $50,000/ month. They carry baskets of cash in Zimbabwe to shop for veggies...
And no, it's bad all over, not just Vegas. It's just the spin media uses is like it's your fault for not doing the right thing as other people are doing just fine. Yeah, if you worked for Goldman you would have had a nice $800K on average compensation this year.
Are we sure that people are buying puts instead of selling them?
well, the vix is super low, less premium to be selling
How about the 240,000 contracts of the December 82 puts that got bought today. THAT'S A BIG BIG BET!
read above its part of the trade in question. put spread rolled from aug to dec at a 2:1 ratio.
240k @ $2.20 -- $52.8 million! Now at $1.90. Down $7.2 million today. Ouch!
Perhaps is was some MSFT execs?!
What you guys are missing is that Barrack Obama is the bizarro Ron Reagan and Ben Bernanke is the bizarro Paul Voulker. How high can this market go when stupid is smart and brilliant is dumb. It happened just the same in 82. Stupid was smart, just ask Tip O'Neil.
.
82 happened because of the mexico debt / peso
crisis....volker was pursuing his mindless super
tight money policy until he was forced by the
mexican crisis to loosen up.....after that it was
all up hill, aided in part by lower marginal tax
rates dropping from 70% to 31% max....
Long bond prices sliding, higher rates should be good for housing and the consumer lol. Should help deliver Goldman's forecast of 45% earnings growth for the S&P 500 in 2010.
I liked how GS let the market play with the break below the neckline and lured the maximum # of shorts before driving the market up again. This is fun once you get the puzzle figured out.
They sold the Aug 92-80 put 1x2 and bought the Dec 95-82 put 1x2...the whole street was pricing this mother. Size was 12kx240k. Not for the meek.
Sorry, that was me...forgot to log in. It should read 120k x 240k.
really?? most of the commenters can't identify someone rolling out a 1x2 put spread?? Maybe CG's right about you guys...
haha..wait, wait??
Gone to 100% cash, even selling the gold. Got to love 18 pips on those 3 month bills! So I miss the last pop to 1030-1060. When this ends, everyone who wanted to buy will have bought. Everyone. Next bid: 600. A whole platoon of trapped Chinese coal miners could survive on the air underneath this market.
HOW the F is this market not even dropping at all? like a 5 point drop is a mini correction?
Dunno, the markets don't seem have natural retracements any more. They are just pinned up all day long.
Folks have been poo pooing the markets here for at least the six weeks I've been tuning in. Funny though --- mkts up 10% since then. You all sound really smart but how's the funds holding up?
Everybody knows zero hedge is a contrarian site. By definition when that many people tune into a bear site, it can only mean one thing!
Is this by design in your opinion? I mean is this just another site that lures people into a position and trades the other way?
TRUE!.. but how do you trade it w/o taking it on the chin on repeated stops? Thats the question.. much is in flux and these markets do SEEM to be pinned either UP or DOWN all day long until the closing minutes..
Its a REAL challenge..
"Many people turn into a bear site" ??????????????
Zero Hedge has about 2400 followers in Seeking Alpha and say maybe another 3000 here, which there is some overlapping, You think this is the majority, think again, and compare to the millions that listen [without understanding] to CNBC's bs all day long.
This is a minority, and a smart one for that, that sees things with a critical eye, not just up up up up for no reason.
I am talking for most of us [and not sure] but we also would love for the market to go up too, the economy really improving and the right policies implemented, but we are not for manipulation and arm twisting of the truth. Right now the truth is far from an improving economy, sadly to say.
amen!
i hate the banks, hate them...doesnt mean i wasnt long going into GS earnings release.
Very well, thanks - I'm 90% cash since ~ Dow 13500, with my "fun shorting fund" still up about 20% even though it has gotten hammered back to reality since April (I feel no reason to panic, since overall I'm positive through this entire downturn)... so how about you, smartguy?
the market continues to go higher because the yen is selling off.
we went higher this morning on dlr/euro weakness. the euro pulled back and the yen sold off.
swapped one carry trade for the other.
12MM shares of SPY is often less then the premarket volume.
Maybe a lot of folks are saying - whoa - I want to buy some puts with the
VIX this low and the mkt so (seemingly) extended.
Dollar sells off, cl goes up, snp goes up because of mkt cap within XLE and OIH segment. If dollar goes up then snp will get @#$%^'d
IMO
and just look at those after hours reality earnings.....
what a complete manipulated joke this market is
Those puts may go in the money faster than people think. MSFT is down close to 9% after hours....
The only thing I am holding right now is TWM. This is very painful.
Clearly this is some kind of put spread.
Can some one run through the setup and the risk reward?
What is the advantage/disadvantage of the 1:2 ratio? I've only seen these described as 1:1
Thanks!
In a 1:2 ratio debit trade (assuming that's what they did here), you expect the market to be biased in your direction, but not too strong, otherwise, you'd end up making money on the long side, but lose heavily on the double short side. In this case, these guys think the market will be bellow 95 but above 82 before DEC expiration. So forecast is for moderate down/sideways until year end.
That makes sense, thanks!
Two more questions:
1) Why would you do this for the front month? The 80's are so cheap it seems like they should just buy the 92's
2) Is is possible they are selling the 92/95's and buying the 80's for protection? And hoping for a mildly bullish outcome?
Yes that's possible too. It could be that they have a credit PUT spread (bullish direction) on the front month (AUG) and a debit PUT spread (bearish direction) on the far month (DEC).
But someone else hinted earlier that there was a roll up here, so they might have closed out an AUG position and opened a new DEC position. Who knows! It's really hard to determine their strategy without knowing which side of the trade they are on. That's why I don’t read into option positions too much. If you think about it, there is a another big player that's taking the other side of this trade, and that guy might be the smarter or better informed party :)
It was a roll...just moved the time frame out a few months.
Got stopped out of my SDS position today.
This virtually guarantees the markets will now crash.
Just letting everybody know.
you may be onto something there. i'm thinking of buying those in the afterhours.
You could have got in at 48.11 this pm, but they are back up to 49.20 ah. I figured I'd hold mine come what may for the next few days.
Hoping they'll pop to 60 as soon as Geithner mentions the 'strong dollar' policy. lol
not that I am a great trader, but today 2 standard deviations, 50 day bollenger bands was well above the line on spy. I was looking back to see if I could see this, and couldn't. therefore, short at about 3:00 at peak money flow.
could someone tell me what the post means?
My largest concern is that the lack of ADVERTISED V shape recovery will kill the sentiment and as the result will make the situation even more painful.
http://dshort.com/charts/bears/Dow-1928-1932-rally-table.gif
Now through in an amplifying machine into the equation and the devastation those jumps might bring to the Economy is huge. Economy is not a f. computer game, there is no reset button, those f. are playing with fire___ SEC wake the f. up : (
p.s. when Volatility goes up, the market does not follow the normal distribution, & relying on the std dev is useless.
BHP just said they think the China restocking of commodities has ended. Guess that explains why copper wasn't up for the 120th day in a row. And the Drybulk Index was pushing down to almost three month lows.
I'm not a brainiac, but even I know that the short position gets put in after a run up, what the close is above the 20 day two standard deviation bollenger band, today.) do not count on more than 1 full down day. with a lower open gap a the open the next am. I saw this happen before on a trade. money flow is not enough to generate a big down move if goldman does not want it to happen. we could easily stop a the 5 day, or 10 day moving avg.
the other way is to trade the inverse funds a bit lower than the low of today. do not count on the market making a much lower move until people buy in. also even comoanies are moving up that had bad results because the market is pulling all things up. I'm afraid analysis of this market is flawed, you do not knw what the boys will do.
This huge spread is by far the biggest I've ever seen cross the tape. As soon as I saw the four legs cross, I put it in my trader portfolio to track it. It's profitable already. Basically, the trader just bet a huge amount of money on a sideways market until August expiration and a downmove going into September. We'll have to watch to see how this one gets rolled, the strategy could change ahead of OPEX.
You can't draw too many conclusions from the sentiment of the trade. It could easiy be a partial hedge on billions of dollars of long positions. (Which it probably is)