Mystery trader bets on huge downturn that could only be preceded by catastrophe.  

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 .

The trader stands to make around $2 billion from their investment should an event trigger a market crash before the third week in September.

Such a cataclysmic jolt could only happen as a result of two factors, China dumping its vast dollar reserves in reaction to the sub-prime mortgage collapse, which it has threatened to do , or a massive terror attack on the same scale or larger than 9/11. Read the rest of this entry »

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