From: Borked Pseudo Mailed 
Newsgroups: uk.finance
Subject: Mystery trader bets market will crash by a third
Date: Tue, 28 Aug 2007 10:25:26 -0600 (MDT)
Mail-To-News-Contact: abuse@dizum.com
Bytes: 1949


http://www.financialnews-us.com/?page=ushome&contentid=2448565379

http://www.prisonplanet.com/articles/august2007/270807_market_crash.htm


Anybody know enough about how put options work to make sense 
of this story?


Excerpts:

An anonymous investor has placed a bet on an index of Europe's 
top 50 stocks falling by a third by the end of September, as 
world equity markets plunged for a third day and volatility 
hit a three-year high.

...................


A mystery trader risks losing around $1 billion dollars 
after placing 245,000 put options on the Dow Jones Eurostoxx 
50 index, leading many analysts to speculate that a stock 
market crash preceded by a new 9/11 style catastrophe could 
take place within the next month.

The anonymous trader only stands to make money if the market 
crashes by a third to a half before September 21st, which is 
when the put options expire. A put option is a financial 
contract between two parties, the buyer and the writer 
(seller) of the option, in which the buyer stands to benefit 
only if the price of the asset falls.

"The sales are being referred to by market traders as "bin 
Laden trades" because only an event on the scale of 9-11 
could make these short-sell options valuable," reports 
financial blogger Marc Parent. Dow Jones Financial News 
first reported on the story.