Thanks bob-C for bringing this to our attention. The Eurostoxx puts are newsworthy but interpretation can be tricky.
Those who bought huge lots of Eurostoxx puts in early June definitely knew something and probably made out handsomely by mid August.
Two scenarios :
Scenario A : TAPE PAINTING ala Michael Meehan in the 1920's only in reverse this time. For those who are not into market history, Michael Meehan was pool operator/specialist trading in RCA stocks and manipulated it to perfection. Once Meehan and his buddies had accumulated huge positions in RCA stock, they traded huge blocks of stock among themselves for substantially elevated prices. When the higher price along with the huge block trade went out on the ticker, people were convinced that strong accumulation was taking place-so they bought in-only to be distributed to.
For those who bought the Eurostoxx puts, there has got to be a counter party who was a buyer. Today, options are monitored closely by a number of services for information. So, selling hysteria can be induced by a few big players exchanging these options among themselves. A canard basically.
Scenario B : The Put option purchases are to be taken at face value. Someone with superior information is acting on this piece of information.
Scenario A will result in the market galloping higher on a new wave of short-selling and put buying while scenario B will see the market dropping a lot.
If one places any credence at all in either, the safe trade is to buy an ATM straddle or strangle.
Hi kaiser soze, nice to hear from you.
Thanks for your nice comments and for your excellent insights and information.
Good luck on your trades.
Bob-C
Disclaimer: None of my posts are meant to be taken as investment advice or trading advice. Do your own due diligence and consult your financial advisor before making any trades or investments.