Somebody did.
Somebody, according to the Dow Jones Financial News, made a put option that the Eurostoxx 50 index will sink by at least a third within the next three weeks. And if they're wrong, they lose a billion dollars. Whathehell?
Now, I'm used to people buying twenty bucks in Lotto tickets on a jillion-to-one chance they'll win big, but someone somewhere did the same thing, with a lot more. Now I don't know anyone who is wealthy enough to treat a billion dollars like is was a single Andrew Jackson. Or maybe it's not the same thing. And maybe it's not a jillion-to-one shot.
They're called Bin Laden trades, after the spike in put options that were placed immediately preceding 9/11: trades that can only make money if there's a catastrophe in the making.
As if the mortgage-market meltdown isn't enough to spook investors, some market players are worrying about unusual options bets that some observers have dubbed "Bin Laden Trades." The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month. Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won't pay off unless the market undergoes an extremely large price move between now and the options' expiration on Sept. 21.
Extremely large bet for extremely large swings are not the usual fare in Wall Street. I'm thinking, either someone is smart, or someone is panicking. But on the heels of the all-but-confirmed Cheney directive to begin an Iraq war campaign this month, maybe it's both.
H/T to Conceptual Guerilla's site.