Posted on 02/06/2013 7:21:55 AM PST by blam
Some Trader Has Made A Very Big Bet That Something Very Bad Will Happen Within The Next 60 Days
Sam Ro
February 6,2013
CNBC
Stocks have been rallying relentlessly to post-crisis highs.
Meanwhile, the volatility index (aka the VIX, aka the "fear index") is near historic lows.
But according to UBS's Art Cashin, some options trader has made an enormous $11.25 million bet that the VIX will explode higher very soon.
And a rally in the VIX is usually accompanied by a drop in the stock markets.
From this morning's Cashin's Comments (emphasis ours):
A Very Big Bet In A Somewhat Unlikely Instrument – My friend, Jim Brown, the ever-alert consummate professional over at Option Investor pointed us to a rather unusual trade. Here's what he wrote in last night's edition of his valuable newsletter:
In past years I have reported on trades that were so large it appeared someone had inside knowledge of a pending event. Sometimes those were massive put positions on the S&P. A new trade just appeared that suggests there will be a market event in the near future. Last week somebody put on a call spread on the VIX using the April 20 and 25 puts. They bought 150,000 contracts for a net of $75 per contract. That is an $11,250,000 bet that the VIX will move over 20 over the next 60 days. You would have to be VERY confident in your outlook to risk $11 million on a
(snip)
Jim then goes on to list some of the scheduled events and deadlines visible over the next 60 days (mostly in Washington). When you add in the broad variety of geo-political possibilities, it's a decent reason to stay extra alert.
Hopefully, this person is wrong.
(Excerpt) Read more at businessinsider.com ...
BOFA ANALYST: 3 Reasons Why Investors Are Too Complacent About The Upcoming Sequester
My son is a 12 year employee physicist(PhD) for a defense contractor and he's concerned.
This is balony ... if you are entering a long or short CALL spread position, you are using CALLS ... not PUTS.
People don’t realize that when spending is cut, jobs are cut. That is where money goes when it is “spent”. If you cut spending drastically, there will be a lot of layoffs. The problem we now have is that the FedGov now has a sembiotic relationship with the private sector’s economy. If the government really does all the cuts us conservatives would like, it would destroy the economy.
In fact, the only thing they can do that does NOT destroy the economy is kick the can and try to inflate us out of this. Problem is, that destroys it too. It just happens later.
It’s why I say there is no human solution to this. We are in this all the way to the bottom. And it is not just the US. It is the world’s entire economy/civilization. This will leave a mark.
The Comedian...
It is a very leveraged bet against market complacency. Makes perfect sense since, by all historic measures, the stock market is at a record level of overconfidence. Although the options expire in 60 days, the buyer has to see a strong market move (probably down) much sooner than that or the option value will have been lost.
Little fracas in the vicinity of Lexington, MA, and then in Concord, MA, as well. 1775 or thereabouts.
ZX12R ~ Waco slaughter, and the Oklahoma bombing as revenge for it. Both 19th.
While not disagreeing with an April 19 date, I think the big event will be later.
The Benghazi attack was timed to blur the focus on, to steal a little power from, to overwrite the big event a decade earlier.
Oklahoma City was to take back the date from Waco.
The most horrible date in human history (according to anyone invested in dominating others) is July 4th.
That's the day the real trouble starts.
If it’s a VERY big event it might be so big that he won’t get paid. So said trader is hoping for something bad but not too bad so as to take the financial system down with it. Just sayin’.
$11.25 million in an option is pretty big as their is a multiplier effect of the option. It’s not a straight trade.
Ditto. We're still in sync.
The Norks are getting to test their big boom rocket thingy.
Something terrible has ALREADY happened. Around November last year. The RATS stole the election and are still in power.
Possibly simply hedging some other bets that rely on a market drop?
Not much of a boom, more of a *pop* exactly what a neutron bomb is supposed to do.
Are the Norks skipping over the big boom stage of development and going directly for neutron bomb and Super-EMP weapons?
They have already demonstrated the ability to orbit a payload.
Yes. He has utterly vanished. Not just from FR, either.
There are few things on earth I would like more than to hear from him.
Nope - They bought the april 20 calls and sold the april 25 puts.
This reduces the cost of the bet by trimming the upside potential.
That article notes that the asteroid will reach the closest point at about 2:24 Eastern time.
They don't bother to say WHAT DAY. Just sometime "next week".
Some Trader Has Made A Very Big Bet That Something Very Bad Will Happen Within The Next 60 Days
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