Analysts Dismiss Suspicious "New 9/11" Trades
Experts track down nature of transactions but concede they represent biggest gamble since last September
Prison Planet | August 31, 2007
Paul Joseph Watson
Market analysts from TheStreet.com have dismissed concerns about suspicious trades that seemed to indicate a major terror attack or other catastrophe was around the corner, leading to a stock market crash, but still concede that the transactions outstrip anything seen since last September.
As we reported on Monday , a mystery trader risks losing around $1 billion dollars after placing 245,000 put options on the Dow Jones Eurostoxx 50 index, leading many analysts to speculate that a stock market crash preceded by a new 9/11 style attack could take place within the next month.
The anonymous trader only stands to make money if the market crashes by a third to a half before September 21st, which is when the put options expire.
However, experts at TheStreet.com have dismissed the so-called "Bin Laden trades" as nothing more than nervous lenders trying to attract customers at a time when the market is fraught with apprehension following the sub prime mortgage crisis coupled with last week's stock downturn.
"Dan Perper, a Partner at Peak 6, one of the largest option market makers and proprietary trading firms, has confirmed that the trades are part of a "box-spread trade," report Steven Smith and Aaron L. Task .
"This was done as a package in which the box spread was used [as a] means of alternative financing at more attractive interest rates" explained Perper.
"Simply put, two parties agree to trade the box at a price that essentially splits the difference between current rates."
"For example, the rough numbers would be that given the September 700/1700 box must settle at a value of 1,000 -- it is currently trading around 997 -- that translates into a 5% interest rate."
"For the seller it is a way to borrow money at a slight discount to the prevailing rate, and for the buyer, it is a way to lend money at a low rate of return, but it's better than nothing at a time when others are scared and have painted themselves into a box (ha ha) because they have run out available funds."
Though seemingly skeptical that the trades could foreshadow outside events, as was the case with the put options placed against American and United Airliners in the days before 9/11, the analysts concede that the volume of the trades "completely outstrips anything seen last September."
They also note that, "The positions in question had option industry experts perplexed to come up with a rational explanation, which are far from the best or most efficient way to profit from what would be outlier events."
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