Size Buyers in SPX Puts

I see some big buyers in SPY pPuts — the
June 125s, which expire Friday.

Both Ray Davies and Bernard Baruch said, "Give the people what they
In that spirit, I am offering out my June 125 Put’s from $1.75 to

I am still long the September 120 Puts, and June VIX calls. Remember that the
VIX options are Euro style, and expire Tuesday. I expect to hold the VIX thru
expiry, unless they approach fair value.

I suspect there is an Arb opportunity in VIX options, and that will bring the
prices more into line with the cash settlement rather than the futures. We’ll
see . . .

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What's been said:

Discussions found on the web:
  1. Ned commented on Jun 12

    I think Michael Price’s expression was “feed the chickens when they are hungry”, which stuck with me for some reason.

  2. jim commented on Jun 12

    Stephen Roach on CNBC.. I figured he was still hiding in a cave somewhere.

  3. EKC commented on Jun 12

    Is the PPT at work again trying to prop the market?

  4. B commented on Jun 12

    If you think there is a plunge protection team, you’d better have them buy a bigger plunger. Because this is one big-assed turd clogging the commode. Al Bundy would be proud. And, they’d better do a better job of saving global equity markets as well cause they are down 25-35%.

    The concept that the Federal government could muster enough energy to spare a $50 trillion global market is right up there with being abucted by aliens.

    Last week 73% of NYSE volume was program trading. I have just two words that people will realize was the culmination of our crooked greed in the 1990s and a major mistake. The bribe OUR Congress took from Wall Street to repeal “Glass-Steagall”.

  5. whipsaw commented on Jun 12


    I have come to enjoy reading your posts whether I agree with them or not, but you kind of lost me here. Glass-Steagall theoretically walled off commercial banking from investment banking as I understand it and I don’t have any doubt that commercial banks engage in program trading now, but…

    _program trading has been an issue going back into the ’80s hasn’t it?
    _aren’t the usual suspects insurance companies, hedge funds, and conventional investment bankers?
    _I accept at face value the notion that congress was pocketed by the financiers long ago (I would say in 1980), but don’t you think that regardless of whomever is engaged in program trading at present, we would wind up at the same destination because of macro forces at work?

    I would be interested in your thoughts. Thanks.

  6. todd commented on Jun 12

    I think program trading can offer significant advantages for traders in situations like the current sell-off. These 90% down days are brutal, but they bring down everything, including the top performers!

    I picked 6 recently bullish stocks and have been accumulating them over the past 2 weeks. Safe to say, I’m running in the red but I firmly believe this is an opportunity and not the end of the world.

  7. whipsaw commented on Jun 12

    ah, here is something that I pulled off of regarding program trading:

    “Mini-Minyan Mailbag – Jason Goepfert – 1:07 PM

    “Jason, did you see program trading was up to nearly 75% of all volume on the NYSE? What’s that mean given the way the market dropped?” Minyan Jon

    Jon, the NYSE program trading stats are double-counted, while the NYSE volume figures are single-counted. That means that programs did not make up nearly 75% of all volume – they made up half that amount.

    Another factor to consider is the annual rebalancing of the Russell indexes this time of year. We always see a spike in program trading in June when these indexes are rebalanced, so that was certainly part of the reason.

    Bottom line, I’m not reading anything into the spike.”

    Most of these guys are pros and insiders to boot, so I would take this to be accurate info.

  8. B commented on Jun 12

    I’m not sure where this guy got his information on double counts but I believe he is erroneous. First off the Program Trading data come directly from the NYSE.
    You want to see the culprits, go to the NYSE web site.

    I guess they should have an asterik that states it isn’t true? Without going into alot of detail I believe his conclusions are inaccurate. The program count rule was changed by the SEC in 2001 and the Naz is more prone to double counts. In any event it has never been the case that NYSE program trading was all attributed to double counts. There were situations where it could arise. And, again, those situations were largely remedied in 2001.

    Plus, program trading has been on the rise for some time so I’m not convinced it has anything to do with the obvious and not to do with rebalanacing anything.

    He may not see any significance in that data but I do. As an example, is it simply a coincidence that every single international market is tanking at the same time? Everyone in the world decide to sell? Uh, more like prgram trading like we saw in 1987 but on a global scale. Program trading basically dumps the entire market as its definition is selling a basket of more than 15 stocks, equities, ETFs, whatever. Do you see selective selling here or internationally?

    I could be totally wrong but I don’t believe for any reasons I see here. IMO.

  9. muckdog commented on Jun 12

    Way to work The Kinks reference in there, BR.

    I’m waiting for Uncle Ben to say “Psyche! Just kidding about that ‘not having inflation contained’ thing!” But those chatterboxes at the Federal Reserve are yappin’ more than 13-yr old girls with unlimited cell phone minutes.

  10. whipsaw commented on Jun 12


    Thanks for sharing your thoughts. My own explanation for everything tanking at once is hedge fund correlation and/or a grand conspiracy among the CBers to torpedo their own markets to get them down to more reasonable valuations, but others may have other, less entertaining ideas.

    None of that is necessarily dependent on program trading, just a lot of scared people running for the door for their own reasons.

  11. C commented on Jun 12

    Bottom line: fear is in control. Fundamentals don’t matter.

    Right now I’m inclined to agree with Mr Gecko. Greed is good. Or at least, it’s preferable to fear.

  12. toddZ commented on Jun 12

    BTW- heavy SPY Put buying makes a lot of sense with the PPI/CPI numbers coming out tomorrow and Wednesday.

    I still don’t think the sell-off has much to do with inflation anyway. The yen carry trade/BOJ liquidity mopping is where we should be looking.

  13. whipsaw commented on Jun 12

    I think that I posted something here about Asian stock tsunamis a week or so ago. From the looks of things at the moment, most of the Asian markets are falling again by 1% or more which I would not think was good for Euro and US markets in the morning.

    But my prediction is that while US markets will drop the first half of the week, they will bounce right back Thursday or Friday, probably because of some meaningless News! that will only take care of oversold conditions until Monday.

    This exercise is a good illustration of market Darwinism at work I think.

  14. trader75 commented on Jun 13

    What’s gonna happen to this chatty kathy Fed, I wonder, when the economy is clearly in the tank?

    Will they go back to the ‘inflation is contained’ mantra as they push on a string?

  15. erik commented on Jun 13

    goldbugs starting to capitulate. japan down over 4%. this is no correction, it’s a downright crash overseas. there’s much more to this than meets the eyes. i would put heavy weight into a very hard landing for housing and the every widing options probes.

    gold is starting to look downright cheap.

  16. Mark commented on Jun 13

    Here’s the carnage:

    Nikkei 225 14,218.60 -614.41 -4.14%
    Hang Seng 15,256.55 -364.89 -2.34%
    Straits Times 2,285.83 -52.70 -2.25%
    S&P/ASX 200 4,838.90 -127.10 -2.56%

    NOT PRETTY. Europe apparently doesn’t like the news either as those indices are all off a percent and a half.

    I love the fact that “todd” has the courage of his convictions to put his money to work in this environment but I think I’ll keep sitting on my hands. Probably til,say, October.

    Agree on gold, erik. I may buy a little deflation insurance policy at $575.

    Also agree with the comment on a rally coming. I pick Wednesday on “Buy the news!” no matter what it is. The touts will spin it big time. Should be very entertaining.

  17. B commented on Jun 13

    We are setting up to be the most oversold since August of 2004. Now, will be get that powerful of a rally? Who knows. But markets never go straight to zero. The future is hard to predict. Don’t confuse the economy with investing. We had powerful rallies in the 2000-2003 sell off and we had one of the best mini-bulls ever in the 1930s Great Depression.

    If we keep selling for another week, we’ll be there. It will be the lowest risk entry point in two years. Will October be as good of an entry point or will we be lower by then? Only time will tell but there’s a pony in here. We just haven’t capitulated and until that happens, we can only guess.

  18. Steve Haughey commented on Jun 13

    Considering the following alternative descriptions of NYSE program trading calculation- especially the last one regarding % of total buys and sells- 73% sounds like some form of double-counting to me:

    NEW YORK, June 8, 2006 — The New York Stock Exchange today released its weekly program-trading data submitted by its member firms. The report includes trading in all markets as reported to the NYSE for May 30-June 2.

    The data indicated that during May 30-June 2, program trading amounted to 73.3 percent of NYSE average daily volume of 1,795.1 million shares, or 1,316.7 million shares a day.

    Program trading encompasses a wide range of portfolio-trading strategies involving the purchase or sale of a basket of at least 15 stocks with a total value of $1 million or more. Program trading is calculated as the sum of the shares bought, sold and sold short in program trades. The total of these shares is divided by total reported volume.

    This is not the only way to measure program trading. Three alternatives for May 30-June 2 would be to:

    * examine buy programs as a percentage of total purchases (36.5 percent);

    * examine sell programs as a percentage of total sales (36.8 percent);

    * examine program purchases and sales as a percentage of total purchases and sales (36.7 percent);

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