Posted on 01/22/2015 6:15:30 AM PST by Citizen Zed
Shortly after noon ET, the trader purchased 50,000 Jan. 23 weekly 195-strike puts on the popular SPDR exchange-traded fund tracking the S&P 500, which trades under the ticker symbol "SPY." These options are perceived to have a low probability of paying off, which explains why they traded at a price of 9 cents a share, for a total outlay of $450,000.
That is the most the trader can lose, and as long as the SPY stays above $195 through Friday, the total amount will indeed be lost. However, if the S&P falls 5 percent between Wednesday at 2 p.m. ET and Friday's close (to give an example) the trader will enjoy a quick profit of more than $12 million.
(Excerpt) Read more at mob.cnbc.com ...
You are correct
100 shares per options contract, not 1,000
Market tanked pretty fast
Sorry, options are for 100 shares, not 1,000. The coffee hasn’t kicked in. So 50,000 contracts at $0.09/share is 5,000,000 times $0.09 or $450,000 (not including commission).
Yes, my caffeine hasn't kicked yet. Thank you!
Thanks.
$450,000 is the big boys playground. I am more in the $450 playground
You can make a lot of money watching Mr Big types in options. It is amazing how it is illegal to insider trade but big option plays are made just before some announcement.
I follow some guys on twitter who track that kind of thing.
One is @WallStJesus
Btw, your alert helped me make the decision to short the run up.
Looking good so far.
Since the astute (connected big money folks) can make money on upticks or downticks, I'm convinced they use their computer trading tools to cause the constant ups and downs that occur daily. The market can start with futures projected at +80, open at - 20, move to +250, then close at -90. Such big and plentiful fluctuations are not what one can call "non-manipulated norms".
Just a gut feeling from observation - I have no expertise.
I did finally find a way to get a guaranteed 6% with protection of principle if things crash so I'm not as concerned as I once was.
Based on the projected profit of $12 mil if I play with the little boys my $450 could make me $12,000.
All i need to do is make one trade for $12K per month and I can retire.....
Each contract is 100 shares. 50000 X 100 X $0.09/share = $450000
Thus, 1 option @ 0.09 = $9.00, and 50,000 @ 0.09 = $450,000. The article's value calc is absolutely correct (well, plus commission, of course).
Now, this trader...well, sounds like he's playing w/someone else's capital. His position isn't really trading; it is gambling at its purest.
He doesn't have to hold them until Friday's close to profit. A move down of 5 or 10 S&P points will probably give him a quick double or triple. He was possibly making a bet on the ECB news with a good R/R ratio.
SPY options are on the S&P 500. The 500 biggest US stocks. I don't think the market would notice if a few friends sold a few shares.
If he was betting on the ECB to not print money, he just lost.
I agree. Just trying to alleviate some boredom. Probably has lunch scheduled for tomorrow with some high school classmates. Alternatively, he’s some set of indicators that are flashing red and he feels the need to put on a hedge. His overall equity position may be so large that 450K downside and a few million to the upside is not that big a deal.
That depends. That little selloff at the open may have given him a quick double.
Looks like the range on that option today was $0.02-$0.06.
Still a loser.
The only thing I could think is a married put, but it's too short term, so I doubt it. Those are usually run out over a longer period of time.
Yes, I caught my mistake as soon as I posted it. Thanks!
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