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Trader makes gutsy bet on a speedy market plunge
cnbc ^ | 1-21-2015

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 ...


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1 posted on 01/22/2015 6:15:30 AM PST by Citizen Zed
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To: Citizen Zed

Gutsy? Or planning a little market manipulation? (Not that I have any idea how).


2 posted on 01/22/2015 6:17:03 AM PST by Pearls Before Swine
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To: Citizen Zed

A lot like playing your hunches in Vegas. Aren’t you glad you have an “expert” playing the stock market with your money?


3 posted on 01/22/2015 6:19:22 AM PST by txrefugee
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To: 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.

I calculate $0.09 x 50,000 as $450. Why am I three-orders-of-magnitude off?

4 posted on 01/22/2015 6:22:42 AM PST by E. Pluribus Unum (Offend a Christian and he is obliged to pray for you. Offend a Muslim and he is obliged to kill you.)
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To: Citizen Zed

at 9 cents a share, only 4500 dollars.


5 posted on 01/22/2015 6:23:44 AM PST by 99tango
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To: E. Pluribus Unum

Isn’t it $4500?


6 posted on 01/22/2015 6:23:56 AM PST by martinidon
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To: E. Pluribus Unum


I calculate $0.09 x 50,000 as $450. Why am I three-orders-of-magnitude off? “

You forgot the commission!


7 posted on 01/22/2015 6:24:04 AM PST by aMorePerfectUnion ( "I didn't leave the Central Oligarchy Party. It left me." - Ronaldus Maximus)
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To: Citizen Zed

It must be nice to have your market manipulation bet published so that everyone can help you win

I bet the shareholders of that stock are happy to be participating in a ‘bet’

All it would take would be a few of his friends dumping the stock to make the price fall. (and they don’t ‘lose’ they just get whatever the stock is worth now anyway)


8 posted on 01/22/2015 6:24:38 AM PST by Mr. K (Palin/Cruz 2016 (for 16 years of conservative bliss))
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To: martinidon

You’re right, but neither of us comes up with $450,000.


9 posted on 01/22/2015 6:24:44 AM PST by E. Pluribus Unum (Offend a Christian and he is obliged to pray for you. Offend a Muslim and he is obliged to kill you.)
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To: E. Pluribus Unum
I calculate $0.09 x 50,000 as $450. Why am I three-orders-of-magnitude off?

Because an options contract is not for a single share, but for a batch of shares.

10 posted on 01/22/2015 6:25:26 AM PST by PapaBear3625 (You don't notice it's a police state until the police come for you.)
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To: 99tango

You obviously don’t trade options. You have to multiply the number.


11 posted on 01/22/2015 6:25:36 AM PST by RummyChick
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To: E. Pluribus Unum

Agreed, there must be something else about these contracts we are missing.


12 posted on 01/22/2015 6:27:37 AM PST by martinidon
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To: RummyChick
You obviously don’t trade options. You have to multiply the number.

That's why you're here. If you would please, elaborate a bit.

13 posted on 01/22/2015 6:30:03 AM PST by gunsequalfreedom (Conservative is not a label of convenience. It is a guide to your actions.)
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To: RummyChick

The trader is losing his money this morning. It could have just been a hedge against a large position.


14 posted on 01/22/2015 6:30:33 AM PST by RummyChick
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To: gunsequalfreedom

1 contract does not control just one share.


15 posted on 01/22/2015 6:31:25 AM PST by RummyChick
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To: PapaBear3625
Would Tom Kivisto please pick up the white courtesy phone ??
16 posted on 01/22/2015 6:31:42 AM PST by Eric in the Ozarks (Rip it out by the roots.)
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To: PapaBear3625

So each option contract is for 100 shares and he bought 50,000 which is 5 million shares; correct?


17 posted on 01/22/2015 6:33:24 AM PST by martinidon
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To: martinidon

on that particular contract..yes..


18 posted on 01/22/2015 6:36:12 AM PST by RummyChick
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To: E. Pluribus Unum
I calculate $0.09 x 50,000 as $450. Why am I three-orders-of-magnitude off?

Options are for 1,000 shares of stock. So, one option at $0.09 is $0.09 times 1,000, so it costs you $90 for that option contract at $0.09.

19 posted on 01/22/2015 6:37:15 AM PST by IYAS9YAS (Has anyone seen my tagline? It was here yesterday. I seem to have misplaced it.)
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To: RummyChick

I shorted this morning on this run up...let’s see if Mr Big knows anything.


20 posted on 01/22/2015 6:38:05 AM PST by RummyChick
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