A September Surprise? OK, maybe not that much of a surprise

A couple of things have come up which mean that I won’t be making any posts for a week or two. However, my regular reader will be pleased to know that I will be leaving the blobfish on guard duty

One of those ‘things’ that came up had me seeing someone off from Heathrow airport earlier today. I haven’t been there for a few months and concrete crash barriers and other obstacles seem to be sprouting up all over the place like mushrooms; presumably a process that has been accelerated by the recent chilling (?) attack on Glasgow airport

The new look Heathrow Terminal 3

There’s a certain, um, Maginot Line quality about Heathrow these days and keen students of history will doubtlessly remember how stunningly effective that was in protecting the people who built it from their attackers…



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Unfortunately, I won’t have enough time to get my head around a story and a couple of links posted by anon under an earlier post but it might be one worth keeping an eye on...

There’s a distinct possibility that someone with a lot of money is betting very heavily that the US stock market will crash in September

I don’t propose to give a lesson in financial options trading here – it’s way too complex and it's not an area I claim to be proficient in but there seems to be some unusual activity going on with ‘SPDR’ options. SPDRs being an exchange traded fund directly linked to the value of 500 of the top US companies

The peculiar thing being the large volume of options being traded and their low exercise prices – in the range $60 to $95 – when SPDRs are currently valued at $146




So, taking the $60 options as an example (and keeping it simplistic), someone is writing options to buy $146 stocks for $60 and charging $86 ($146-$60) for each option.

Now the whole point about options is that they normally only make sense if there’s a chance the person you sell them to won’t exercise them – that way you pocket the money you sold the option for. However, the options in question are priced so low in comparison to the current market price it is virtually certain that anyone buying them will exercise them before they expire in September.

Unless, he can buy the same stock on the open market for less than $60

There are several possible reasons why someone might be writing so many low exercise price options...

• it could be an indirect way to unload a large holding of SPDRs in one go without driving their price down by selling them directly on the market
  

• it could be a particularly desperate ruse to raise a short term, risky and expensive loan

or

• someone is extremely confident the US stock market is going to drop by 30%+ in the next month

It’s difficult to put net values on all this but the numbers involved are certainly much larger than the anomalous trades on airline stocks immediately before 9/11

There is already some talk that whoever is placing the bet may have advance knowledge of some ghastly terrorist incident that will panic the markets. However, as someone else commented underneath one of my posts...

You don't need to be much of a financial analyst to predict a market crisis in September. Every summer market shock in history has directly lead to a crisis in Sept/Oct because ... the big hitters get back from holiday.

This time around its as good as a dead cert. Just you have to get the day right to make a killing and it wouldn't surprise me if someone tries to tip the market over the precipice on purpose; it won't take much.

(see also: Mystery Trader bets markets will crash by a third)

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Anyway, time to put the Blobfish on guard duty. Barring the complete economic and social collapse of Western Civilisation I’ll be standing him back down in a week or so.

Or maybe I should use a seagull instead...

from The Daily Mash

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