2nd Posting Of This.....But Still...........WOW!

We’re not too keen on conspiracy theories. But two things ran across our desk this morning that gave us pause. First, an unnamed collection of investors just placed a $900 million bet that the S&P 500 will plummet between 35-59% in the next month. In trader speak: Anonymous parties agreed to buy and sell 120,000 SPY September call options using deep-in the-money strikes ranging from 60-95. “If you’re not options savvy,” writes Keith Fitz-Gerald, a contributing editor to Money Morning , “don’t worry. SPY -- also referred to as a “spider” in trader parlance -- is an exchange-traded fund (ETF) that mimics the performance of the stock market’s closely watched Standard & Poor’s 500 index (INX). These strike prices equate to a SPY trading between 600-950, or roughly 35.81-59.46% below where it was Monday. And then we heard the blogosphere is abuzz with rumors this morning that the U.S. government is planning a major propaganda campaign for a war against Iran to commence in September. From a blog called “Informed Comment Global Affairs”: “They [the source's institution] have ‘instructions’ (yes, that was the word used) from the Office of the Vice President to roll out a campaign for war with Iran in the week after Labor Day; it will be coordinated with the American Enterprise Institute, The Wall Street Journal, The Weekly Standard, Commentary, Fox and the usual suspects. It will be heavy sustained assault on the airwaves, designed to knock public sentiment into a position from which a war can be maintained. Evidently, they don't think they'll ever get majority support for this -- they want something like 35-40% support, which in their book is ‘plenty.’" These SPY plays expire Sept. 21… hmmn…. What’s one to think? Well, it’s really easy to make these kinds of associations on the Internet. But that’s also what makes following the markets with so much information available at one time such a hoot.
“Naturally,” says Fitz-Gerald, “the silence around this trade has put the conspiracy theorists on edge and set the blogosphere aflame. Most of the theories are outrageous, but there are a couple that -- quite frankly -- aren’t so farfetched and even make some sense. But I have to stress, once again, that nobody who’s actually a party to either end of this transaction has been identified or is talking, which makes this all the more noteworthy -- and maybe even a little spooky.”
Most likely, some big fund owns a boatload of SPY shares to offset their riskier bets. That fund’s manager just blew a big speculative play… maybe betting on natural gas rising and getting burned once hurricane Dean didn’t affect prices. So this poor fellow needs millions in cash, right now, to cover his busted nat. gas position. He can’t go to the bank, or sell shares, because the world would know he blew it… the fund would crash and his Wall Street career would be over.
What does he do? He writes covered calls on 120,000 SPY shares and sells them insanely deep in the money. People buy ‘em up, almost instantly profiting, all the while the market doesn’t notice because the underlying value of SPY isn’t affected. Sure, as the seller of SPY options, he and the fund take a big loss, but it’s better than losing their shirt on a speculation, and way better now that investors and the media are kept in the dark. The proceeds from selling those calls go back into the nat. gas plays, losses are more spread out, and all is well in Squanderville.
Or we’ll see the second great depression by September 21. Interesting stuff, either way.