That, if you're unaware of what you're looking at, is the option chain for the "XLF", the financial sector "spyder" ETF, for April expiry.
The April $16 and $17 PUTs have enormous open interest. The $16s have been there for quite a while.
The $17s, however, have not.
At first blush you'd look at this and think it was a spread, which is not all that unusual. But then you look more-closely and on 1/24 you find that 50,000 $17 PUTs were opened against 44,000 open interest (approximately) and that was all the material movement through the end of the month.
Then, on the first of February, an obvious spread appears to have traded for 25,000 contracts.
And then the big daddy appeared -- a monster set of trades on the 5th -- and both "stuck" the next day.
That is, these were not daytrades. They're positional. And they're still there.
Assuming this was a "spread", the person executing it spent about 20 cents. Since each option is 100 shares this is $20.00 times 100,000 (approximately), or $2 million.
On a 10% decline they will net 5x their bet, or $10 million.
If the decline is larger they get nothing more, as the short PUT sold against the long (assuming it's a spread) caps their profit. But that's a hell of a lot of money to slap on the table -- unless you know something.
We'll see if the person who placed the trade indeed does.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.