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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (92294)	1/3/2009 11:32:06 AM
From: ajtj99	Read Replies (1) \| Respond to of 116555

Wow, 148,967 Dec. 2010 SPY puts purchased yesterday. It shows up on the AMEX option stats, so it must be legit. That's a monster trade. It's somewhere around $62-million at the closing price yesterday, although it could be as high as $75-million if they got a great fill early in the day. My first thought was it could be similar strategy to the Buffett trade where he sold deep, out of the money puts 10-years out on the SPX through Goldman. Of course, the fallout of that trade meant Buffett had to buy part of Goldman to get them out of the doghouse on his position. The other thing that came to mind was a mis-typed order that was enterered, filled, and then had to be reversed. We didn't hear anything about that, so it's probably doubtful that was the case. I really doubt anyone purchased puts that far out of the money that far out in time even if it was an attempt to hedge. You just don't see that kind of move from the pro's. What are your thoughts on that trade?

To: mishedlo who wrote (92294)	1/3/2009 11:45:48 AM
From: ajtj99	Read Replies (1) \| Respond to of 116555

Mish, my other thought was, why the SPY? The commission on the SPY trade would be 10-times the commission on a SPX big contract trade. If you're good enough to do a big trade like that, you're good enough to know the big contract is just as liquid as the SPY when you're dealing in size. There were 9202 contracts traded on the Dec. 2010 SPX 500 puts yesterday as well. 148,000 contracts on the SPY is huge, but 14,800 contracts on the SPX big contract is not that terribly unusual, and that's what the SPY trade would be if it were done on the SPX big contract. The more I look at this the more it looks like someone goofed in the execution of a trade at a brokerage or a hedge fund. I suspect they wanted Dec. 2010 SPX 500 and somehow SPY 55 was done and had to be unwound. There's no way to know, however.