Tuesday, August 28, 2007

Mystery trader bets on huge downturn

Market Crash Forecast Suggests New 9/11

A mystery trader risks losing around $1 billion dollars after placing 245,000 put options on the Dow Jones Eurostoxx 50 index, leading many analysts to speculate that a stock market crash preceded by a new 9/11 style catastrophe could take place within the next month.

Such a cataclysmic jolt could only happen as a result of two factors, China dumping its vast dollar reserves in reaction to the sub-prime mortgage collapse, which it has threatened to do, or a massive terror attack on the same scale or larger than 9/11.

Posted by sold 2 rent 1 @ 04:56 PM (2261 views)
Please complete the required fields.



30 thoughts on “Mystery trader bets on huge downturn

  • dohousescrashinthewoods says:

    Crazy stuff. Anyone fancy following suit on a whim? Perhaps a smaller put option though.

    Reply
    Please complete the required fields.



  • Will it need this?

    Surely all it needs is a realisation that the UK economy is built on debt with the US economy in (second?) place…

    All 1.3 trillion of it (or 1.67 times GDP)….

    Although disgraceful that any sensible Government has allowed this too happen it should make any prudent financier very concerned, creating a run on currency and then the concomitant meltdown.

    We are folks, bankrupt and just as Messrs Callaghan et al when off to the IMF in 1978….

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    Having made a nice 35K profit 2 weeks ago. I am now back in with a few more put options.

    My regular market forecaster at http://www.mclarenreport.net.au/articles/
    is still predicting further falls next week.

    That was my first time to trade options and I couldn’t sleep properly.
    God knows what it must be like to have $1B on the line – madness.

    Reply
    Please complete the required fields.



  • STR

    Put options are not trades, they are bets, and as most seasoned gamblers will tell you, sooner or later ‘The house’ always wins.

    congratulations on the 35k all the same 😉

    Reply
    Please complete the required fields.



  • May be there was some big stop loss as well

    Reply
    Please complete the required fields.



  • dohousescrashinthewoods says:

    Unless you are confident in the movement of the market, in which case you’re probably sitting smug, just hoping Jack Bauer doesn’t come round for one of his chats.

    Good work on the 35K – wow. At least you can sleep again?

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    The mad thing is I sold too early and it could have been 80K.
    Still, mustn’t get greedy – 80% of new spread betters lose all their money in the first 2 months.
    I figured from 9 months research that this was/is going to be a unique event in history.

    The real issue of course is when to move into gold…..and what type.

    Reply
    Please complete the required fields.



  • Hey less of the high finance stuff please. It’s people like you who got us into this mess in the first place!

    Reply
    Please complete the required fields.



  • Just remember, easy come easy go, short term trading is akin to gambling rather than investment hence the term speculation, so don’t put your shirt on it.

    Reply
    Please complete the required fields.



  • david20040_0 says:

    Well done with the 35k, that is a result.

    If a terrorist attack like the World Trade Centre happened again, wouldn’t interest rates just hit the floor again?

    Reply
    Please complete the required fields.



  • David, you’ve just breached a taboo we never breach on this site. Sums you up so far.

    Reply
    Please complete the required fields.



  • Backseatcrasher says:

    the best guess is that this is a long only fund hedging their position

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    David,

    If the US goes into recession then IRs will hit the floor anyway – it won’t need a 9/11
    1990 recession IR from 10% to 3%
    2000 recession IR from 6.5% to 1%
    Do you see a pattern here.
    But slashing IRs this time won’t fuel another housing boom – it will be Depression time.
    Japan 1990. US 1930.

    Reply
    Please complete the required fields.



  • backseatcrasher says:

    This looks like a long only fund hedging their position. I doubt this is a guy who thinks, hey lets bet the house on the biggest down turn in a lifetime.

    Reply
    Please complete the required fields.



  • david20040_0 says:

    sold 2 –

    why won’t it trigger another housing boom, more cheap credit will be available.

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    cyril,

    “It’s people like you who got us into this mess in the first place!”

    We are in this mess because people borrowed recklessly to live lifestyles they couldn’t afford.
    Lenders lent recklessly too and cashed in on borrowers stupidity.

    A few bets with some traded options after 9 months solid research is in no way reckless.
    I know when the depression comes my travel business will be finished and I am just trying to position my family in a good position for the downturn.
    I live a fairly modest lifestyle and your comments seem out of place.

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    David,

    Look at the graph again
    Rates had to go to 1% last time to save the day.
    Each time there is a recession, rates have to go lower than the previous recession to create enough debt to continue the debt ponzi scheme.

    Remember, once you hit near-zero IR it is GAME OVER. Depression time.
    Lenders won’t lend. Borrowers won’t borrow.

    The US housing market is so way over its long term average than it cannot save the day again.
    Once house prices start falling, nobody will want to buy property and no lender will want to lend.

    The Fed has ran out of ammo.

    Reply
    Please complete the required fields.



  • S2R, agreed, but how and when will the bailout start and where will the money go / end up?

    Reply
    Please complete the required fields.



  • Cheekie Charlie says:

    David
    Rates won’t go down this time because inflation will not allow for this to happen again.

    Reply
    Please complete the required fields.



  • The bailouts will prove ineffective – sentiment is totally bearish – bailouts will only signal mortal danger to the markets and people will get out at any price – everyone knows the extent of the financial pyramid scheme and sentiment will rule. We had the wall of red today – tomorrow could well see the crash markets crash in earnest. Far eastern markets will be interesting tonight – I wonder what the losses will look like when we wake up in the morning – if they fall expect the footsie to continue falling tomorrow – sentiment is core to this crash and a ‘new’ understanding by investors of the grave danger that the largely unregulated markets now pose to their savings and investments.

    Reply
    Please complete the required fields.



  • Iran?

    Reply
    Please complete the required fields.



  • “A mystery trader risks losing around $1 billion dollars after placing 245,000 put options on the Dow Jones Eurostoxx 50 index”

    This level of exposure is indicative of inside knowledge, similar to the mystery put options on American Airlines prior to 911. However, I’m not sure that another ‘terrorist’ attack is required to jolt the markets down. Confidence is ebbing fast, bonuses as evaporating, debt has reached critical mass, and the central bank manufactured credit squeeze that will transfer wealth from the middle classes to the elite is gathering pace. Money is there to be made by those who have waited patiently and who are in credit.

    Reply
    Please complete the required fields.



  • Hello sold 2 rent 1, well done and good judgement, this depression talk is fairly worrying I have a meager isa savings ,under 20k, which I am putting into an NS+I isa as I thought this would be a safe option, I really have no idea what could be a safe place for my hard earned cash, you seem to know your onions where is the best place (safest) to stash the cash, sorry to be so direct but all this talk is getting me a little spooked

    Reply
    Please complete the required fields.



  • Harold spot on mate, wouldn’t put it past someone of significant financial might (maybe a big hitter like Soros et al or Russian/Chinese interests) being behind this one… The markets are shot (seen the Dow today!) the game is over, all the big boys are returning from 2 weeks in Bermuda, the next 8 to 10 weeks is going to be chainsaw time on the markets!

    Reply
    Please complete the required fields.



  • Here’s another thought could be a hedge fund or finance group on it’s knees (I.e Nick Leeson the 2nd) that’s going down in 3 weeks anyway and is just playing a huge bet… If it pays off then glory, if not we will just take the corp jet to Brazil and never come back!

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    Cheekie Charlie,

    “Rates won’t go down this time because inflation will not allow for this to happen again.”
    That is the 64k dollar question.
    Is it deflation or inflation?

    Quote I read today:-
    “if the dollar begins to fall as a credit crunch begins, which Fed directive gets more emphasis? Economic growth or price stability? During the 1930s, the Fed supported the dollar and price stability. That didn’t seem to work. Should we try the other method this time? Of course, that would mean throwing out all the hard-learned lessons of the 1970s.”

    Reply
    Please complete the required fields.



  • This article is crap. How can they say that the trader risks losing 1B$ if it doesn’t happen and make 2B$ if it does? That would imply that there is a 1/3 chance of such a crash happening… doesn’t make much sense.

    I used to be an index trader, so let me give a bit of explanation. These types of options are worth nothing, but of course people don’t sell options for nothing, so they will make you pay anything between 10c and 1€. Suppose it’s 50c. Given that the guy bought 250k contracts, that means 2.5M options, so he paid around 1.25M€. For each point that the Eurostoxx ends up below 2800, he will get 2.5M€. So for example, if the market ends at 2700, he makes 100 x 2.5M€ = 250M€. However, there is no way for him to make 2B, unless the Eurostoxx goes below 1000, which is not just unlikely, but in that case there is little chance that the counterparty will be able to pay anyway…

    Reply
    Please complete the required fields.



  • My guess is that its likely to be China, hedging their bets on the US bonds which they are planning to sell.

    Reply
    Please complete the required fields.



  • Skintacademic says:

    Surely by placing such a large bet on a downturn they are in effect helping to create the downturn by eroding confidence and making others think that there is some inside knowledge about the future of the market? At this scale, it’s more than a gamble, it’s a reshaping of the market.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>