Markets to plunge 30% by the end of September?
This is an interesting 9-day old article about a large purchase (245,000) of put options on the DJ Eurostoxx 50.
The mystery investor has bought put option contracts on the DJ Eurostoxx 50 index that will result in a profit if it plunges to 2,800 or below by the end of September. Based on the 2,800 strike price, the position covers a notional €6.9bn, and potentially even more using a market price of about 4,100 when the trades were done on Tuesday and Wednesday.
The identity of the investor is unknown but market sources speculated it was either a large hedge fund hedging itself against deepening losses, or a long-only fund manager pressing the panic button to protect its gains.
Let’s see how good their timing was:
Hmmm… not so good.
The article also includes an interesting quote from a Goldman Sachs analyst:
“I think I shall remember this day as the day that I saw the market go to hell, look into the abyss – didn’t like what it looked like and then came screaming back up as far away from there as it could get. … It was a truly spooky day and I’ve seen a lot over the last 20 years but today will be one that anyone who saw it will never forget. But this is what market bottoms are made out of.”
