That was a real good link although most laymen won’t understand it.
I’ll try to sum up the points in plain english.
a) the put option trades were not conceiveably part of standard option trades and it’s pretty easy to tell.
b) the put option volume was extremely abnormal
c) there was a theoretically risk free arbitrage play that professional option traders SHOULD have executed, but did not because in reality there is not enough volume (liquidity) to do it without moving the price. This means that the put trades were REALLY abnormal volume.
Not I, escapol. I suspect that the news agencies aren’t reporting either because they can’t (no info available) or won’t (don’t want to upset the applecart by letting the bad guys know how close they’re walking to the abyss). I know that the early stories quoted the officials from the exchanges as confirming that there was an investigation, and that’s it. They don’t want to comment on an ongoing investigation, and I can perfectly understand that. I suppose a really interested news agency might try to undertake its own investigation-but it still wouldn’t want to report on the progress.
I suspect we’ll hear more about this down the line. And this may not be unrelated to Bush’s executive order freezing various suspect assets …
I don’t wanna name names, but I was talking to a reporter for one of the major media sources tonight, and this story is well known. If they haven’t caught the guys by now, the money is as good as in Bin Ladens hands.
It’s understandable in the aftermath that regulators didn’t follow up on this on day one, but those positions are probably closed out and the money laundered. Come on, the US markets have beeen open for a week and a half, any one that knows the biz would have closed positions a long time ago. Once closed, that money is gone.
How do you figure? As I noted in an earlier post (where I mistakenly identified them as $40 puts–should say $30), the open interest in these puts is still around 2,000 (and still is today). If the position had been closed, the open interest would drop.
And I don’t think the cumulative volume since 9/11 on these options would be enough to suppose the position had been closed.
Theoretically, one could buy common to hedge the position, but you still haven’t ‘booked’ the profit.
My guess would be that ‘they’ never figured the markets would be closed for so long. They were hoping to get off the closing trades before anyone noticed. But with the markets closed for almost a week, people picked up on it before they re-opened. Therefore, they couldn’t (and can’t) get off the closing trades without raising an enormous red flag.
I don’t have the open interest figures but sure you are correct. That said, European, Asian and commodity markets were open the same or next day, and took a beating. Those positions could have been closed out easily at great profit and the money laundered the same week. For the CBOT trades, if the open interest is still there, then they would probably walk away from them.
I guess my initial assumption was incorrect…I would have thought this issue of who bought these puts would be solved. I know the European market positions were probably closed, but I’m surprised there has been no progress (at least reported) on the US side of things.
The open interest on UAL $30 puts is still around 2,000 (as it has been since before 9/11/01).
Interesting though, the AMR $30 puts are showing only around 500…I thought this was around 2,000 also (I don’t have access to past open interest figures or past volumes, so I can’t be sure about this…but I remember, back in Sept., thinking it odd that both AMR and UAL $30 were both around 2,000 open interest).
Nothing has been reported on Bloomberg. If I don’t see it there or on the WSJ, I’m going to assume that regulators were way too slow. To be fair, the regulators had to act within 24-48 hours of the attack if not faster, and there is absolutely no way they could move that quickly.
I would say the terrorists took profits on their non-US positions and have laundered the cash already. They have written off the US positions, and they will expire unexercised.