This page has been archived and commenting is disabled.
UBS Buys 3,000 Large S&P Contracts
Yesterday we discussed the S&P futures capitulation following last week's record cover in Large S&Ps of over 66,000 contracts. We just got word that as of 11:20 am CST UBS has purchased another 3,000 S&P Large (thank you open outcry). Cost to them: nearly $1 billion. On a cash equivalent margin basis, this is about $20 billion in S&P moving power. As UBS is not quite as, let's say, connected as GS et al, these are considered to be short covering trades.
h/t Fidel Sarcastro
»
- 8150 reads
- Printer-friendly version
- Send to friend
- advertisements -
"Short covering trades", OR.......
....UBS' apology to Uncle Sam for pissing him off with the tax haven issues, and to make a mends, it is now UBS' turn to take responsibility in trying to move the pig higher?
Everyone seems to be bailing water as fast as they can. All this short covering and the market can't seem to break out?
"Smell that? Do you smell that? Desperation, son. Nothing else in the world smells like that. I love the smell of desperation in the morning."
http://www.youtube.com/watch?v=bPXVGQnJm0w
What if they actually are going long the S&P ?
Then expect another hit to their earnings and equity later in the year.
Same thing. If they are actually going long, why is the market stalled? Considering what's going into the market (look at the ZH article on equity flows into stocks and the other article yesterday titled capitulation) you would think they are assuming the market will be going higher. Yet the market is listless.
I don't have the answers. I'm simply asking why the behaviour is as it is. It appears a whole lot of whales are bailing water, trying to keep the leaking boat afloat, regardless of if it's short covering or just a long bias.
I don't know anyone who's buying. Who is buying with conviction?
I see, so either way you look at it comes back to more of the same.
I wonder who is selling such volumes (I suppose the earlier 66,000 do constitute a rather large volume) for them to buy large without raising the market. Unless they have an agreement with an outsider they help to liquidate a long position.
Personally I think the so called "smart money" is seeing the same thing we are seeing. And they aren't seeing any reason to stay fully equity invested at this time. For a while they climbed on the coat tails of the obvious manipulation but they now see it's faltering, they know the Fed won't let go easy, so they're using the endless bid to exit stage right, or at least lighten up a bit, particularly now that this rally is now past one year and the first positions can be liquidated as long term gains.
Buying an option isn't the same as buying the underlying stock.
I don't know about you, but I will take my investment dollars and play in a different playground, one where the rules aren't rigged.
So, the large specs are finally giving up! Good, its about time.
Short covering trades? What nonsense. The question is if this was a directional trade or part of a hedge offsetting long positions and thus neutral. How do we know they didn't sell an equivalent long equity inventory for a net effect of ZERO?
Correct.
Possibly they closed out an equivalent long position to raise cash. Maybe they see bonds/Treasury shorts are a better opportunity near term so shifted their exposure.
My thoughts exactly. This can as easily be an indication that a long equities position was closed, as that a new long futures positon was opened or that a short futures position was closed. Since we're potentially only seeing part of the overall trade, it is difficult to say which.
It is also odd that such a large trade was made all at once. One would suspect that a message was being sent. For whom the message was intended is another question.
Or propping for a large long position about to be closed??? Like a position in a TBTF bank?
IMWTK
Short financials, long the index might just be a winner.
It feels like strange timing to close out a short now...
they are so stupid. i just need to repeat that to make myself feel better.
Who is on the other side of this trade and how would they react to this "capitlation". If the S&P were to just shoot higher would not someone who is currently raking in large premiums be out a ton (literally) of cash?
margin on 3000 bigs is 75 million give or take. where is 1 billion coming from?
Tyler, thinking these quarter end type rebalancing trades are significant but the buying power you describe is a tad over the top - peps use futures for the leverage, liqudating doesnt imply these massive cash flows...this is PV01 type stuff....thanks for the great info as usual..
EU Support Plan Hasn’t Reduced Greek Financing Risk, Fitch Says
the fact that a firm is buying the big SnP's is pretty much meaningless... 3k big is the equivalent of 15k e-mini, which is really a drop in the bucket
how do you know what they are doing in the options, or the eminis, or the spy or the underlying stocks? that buy could indicate covering, going long, direction neutral or even taking on more short exposure somewhere else
Of course it's meaningless. But you see these strange topics generate activity and clicks on the website. People love to read stupid explanations on why they are losing money on their trades. What better scapegoats than the evil UBS and GS. Oh and Bernanke, too.
on a side note: I wasn't even aware that people still use the SnP floor for directional stuff anymore. Just figured it was a giant circle jerk of guys trying to rob tics from each other, afraid the computers may rise up and take over.
If they ever took the emini tic size down to .10 it'd probably be all over for them.
Being that the U.S. Government is now going to sell its shares of Citigroup, the UBS move looks like a head-fake.
Again, there is no possible way you can call this a head-fake unless you know with certainty what UBSs actual plan was with this move. Several people already brought it up, this was no doubt one of many hedges in place for an instution as large as UBS.
Due to accountability (at least, when its enforced), one does not simply purchase 3k large S&Ps without it being offset with another hedge, and this purchase could have very well been that 'other hedge'
I personally think they got word that the Fed will be extending liquidity programs on its MBS purchases, possibly more Treasury purchases. And/or replacement of {Larry Summers|Tim Geithner}
Market goes to 1350 easily on those announcements.
Considering Treserve's alternative is GD1 (Great Depression 1, as opposed to today) foreclosure rates, more MBS purchases probably isn't a secret.
And could this be hedging activity? For instance, they could be selling 2x as many calls on the SPX and buying S&P Large to hedge.
The MACD on the SPX/NDX is starting to rollover. We can easily get a 100 point drop on the S&P if we get some kind of catalyst (higher interest rates now that jobs are coming back).
Expect up and down movement for some time, it's called accumulation and distribution. Nothing goes up or down in a straight line my friend.
What Dow have you been watching ?. Up 32 of 34 days and down on options ex at that.. Parabolic move up.
Would it not be neat if you could move the equities with an underlying commodities trade? I could see the swing in futures happening last week on Fox news, oh which side to take, it drives me crazy....
I sit here and think that the "market" has sucked all the "short" money out, now its sitting here watching everyone go long, and is about to sell into the most awesome rally evuh, that is about to develop. I can say that because I am not "in it" just sitting on some long term, out of the money....puts.
Maybe they are getting out while the gettings good. They know that this game isn't going to last to long, and it's better to get your money out while you still can.
Current EUROYEN / EURO strength and USD weakness continues.
http://www.zerohedge.com/forum/latest-market-outlook-0
I've been mulling over the (previously reported) buying by GS and the reports of pit traders e-mailing ZH with reports of Goldman buying up all the S&P Large they can get.
Folks, GS may be the sleaziest organization on planet earth, but they ain't stupid. If their wholesale buying is that obvious that it gets reported this way, that tells me they want it to be that obvious. After all, why buy on S&P Large (open outcry with lots of witnesses) when you could buy ES or OTC contracts on the sly?
I suspect a disinformation campaign. I have a gut feeling Goldman is getting net much shorter the S&P through unobvious means while very visibly buying S&P Large to throw everyone off.
I'm still positioned heavily short and not going to be spooked by the reports of Goldman buying the 'large.
xPat
Sorry I don't believe any of this XYZ has just bought 5 kazillion large ES so the market must be going up bullshit.I didn't believe it yesterday and I am even more sceptical today after seeing the open.This is beginning to look like one enormous topping out pattern to me,and given that the market has been driven to these stratospheric levels by you know who and it is currently running on fumes I think recent stories like this one today and the one yesterday are just that -stories to get the last few mugs in right at the top.
Still short the QQQQ's - and will probably add more later.
ucvhost is a leading web site hosting service provider that is known to provide reliable and affordable hosting packages to customers. The company believes in providing absolute and superior control to the customer as well as complete security and flexibility through its many packages. cheap vps Moreover, the company provides technical support as well as customer service 24x7, in order to enable its customers to easily upgrade their software, install it or even solve their problems. ucvhost offers the following different packages to its customers