By Douglas J. Hagmann
If you’re like me, you’re just a “regular” person whose lack of understanding of the stock market is enough to keep you away from it. For me, it’s a spectator sport that’s rigged at the highest levels in favor of the “initiated ones,” or as Gerald Celente calls them, the “white shoe boys.” If you’re like me, you probably don’t have any insider channels of information that would permit you to make $100,000 in the short span of ten months from a single $1,000 investment in cattle futures, the way Hillary Rodham Clinton did in 1994. Okay, so take me to task because the stock and future markets are two separate trading venues, but you get the idea.
But just as you needn’t stick your hand in a blender to know it’s going to hurt and leave a mark, you don’t need to be a financial genius to know that certain market trades indicate an insider foreknowledge that something bad might be headed this way. One case in point is the odd put options on airline stocks just before the attacks on September 11, 2001. You know, the trades that according to the Keene Commission were merely coincidental and not out of the ordinary at all. A “put option,” by the way, is a “bet” made by someone that a particular stock or asset is going to lose value by a certain date.
Lest you still cling to that outlandish conspiracy nonsense and continue to feel that something is still amiss with the 9/11 put options, rest assured that the crack investigative husband and wife team known as “Snopes” has determined that you are in need of a cup of steeping hot passionflower tea and a strong pharmaceutical to pull you back into the reality of Oz. Their source, of course, is none other than the Keene Commission Report itself. Go figure.
Something happened this week that brings back haunting memories of the 2001 put options of airline stocks, except this “bet” is against the entire U.S. economy. This week, an anonymous trader bought 100,000 put options on the ETF, which is an acronym for an exchange-traded fund. One commonly traded ETF is XLF, which, in the most unscientific and basic terms, is a group of funds that is like a barometer for the stock market.
Now, such trades involving ETF-XLF are common, except when the put options (bets that the value of an asset is going to go down) are so large and so significant that they scream of insider knowledge with big flashing lights and arrows. This is one of those. In this case, it is a bet against the stock market, although this is admittedly a rather oversimplified explanation – but you get the idea.
According to professionals who watch this activity for a living, normal single trades involve maybe 500 contracts at most. That’s why certain professionals took notice of an order this week of 100,000 put options or 200 times the high trade volume of 500. It becomes even more curious when one considers that the trader is “betting” that the market will take a significant hit by the end of April. (The put options are dated April 20 and 25, 2013, right around Hitler’s birthday, for those of you who follow things like that.)
At this point, I could mention that the VIX, or volatility index (a/k/a the fear index) is at historic lows, and a bet like that recently made is actually contrary to the trend, thus making the “bet” even more curious, but I’ll spare you the market talk that I barely understand. I will, however, tell you this. I contacted a stock broker yesterday with over 25 years of experience in the market and asked about this put option. He said that he is aware of this activity and told me that someone is risking a lot of money betting on a major stock market correction.
“A crash?” I asked him. “Explain it to me,” I pleaded.
“Shhhh, we don’t use that term,” was his reply, as he opened his desk drawer and grabbed a bottle of antacid tablets. “Someone seems to know something. I’ve never seen anything quite like this,” was his reply. “Well, maybe once. Remember those put options before 9/11?”
I asked this stockbroker if we normal people, those with our life savings stashed in a small coffee can in the back of our kitchen cupboard, should be concerned.
“No, of course not, not unless the trader is correct with the $11 million bet. That means that there would be a crash… er, I mean a significant downward market correction. If that happens, then we’ll all be looking at huge losses that could nuke the market and have a domino effect across the financial board.”
“Of course we should be worried!” This could be the opening salvo of an economic collapse that everyone in the media and our elected officials are saying won’t happen.
Despite the market cheerleaders, we are to enter into the most serious financial crisis in U.S. history. If the trader is correct, the collateral damage will affect all of us.