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Home / Business / An anonymous Buffett-style bet on the S & P 500 causes a stir on the options market

An anonymous Buffett-style bet on the S & P 500 causes a stir on the options market



An anonymous trader caused a sensation on the US stock option market on Monday. A massive bet reminiscent of Warren Buffett's famous bet on global stocks over ten years ago.

The Trader Sells 19,000 Put Options on the S & P 500 Index The firm's commitment to buy the market benchmark at 2,100 on December 18, 2020 showed data from New York-based options analyst Trade Alert.

As long as the index does not fall more than 22 percent from the current value. At 2,582 at this time, the bet will earn the merchant some $ 175 million in rewards.

Buffett's Berkshire Hathaway sold billions of dollars in stock index options between 2004 and 2008, assuming that markets would rise over the next 1

5 to 20 years. Although the trades were made anonymous, they were eventually disclosed in regulatory filings.

Berkshire has raised over $ 4 billion in premiums on options. The holding company has other contracts that have not yet expired, including a final tranche to be settled in 2026.

While selling on Monday was nowhere near as big as Buffett's, the trader could still lose more than half a billion dollars if the stock gets mad in the next few years.

For example, if the S & P 500 loses 34 percent of its value by December 18, 2020, the trader will suffer a loss of approximately $ 558 million following a refinance analysis. [19659003] The market has been volatile in recent months. The 2018 S & P deal was nearly 20 percent lower than its record high in September, although it has since regained half that rate.

A further 3,600 of the same put positions were traded on Monday. This helps to increase the total number of contracts per day to around 24,000. According to Trade Alert, 5,500 contracts were exchanged on Friday.

Some market participants thought the trader would probably hedge against another position rather than bet that the stock would rise.

"The natural sellers of long-term down-moves are structured product schemes with banks hedge against private customers buying structured debt securities that include short-put options," said Benn Eifert, Chief Investment Officer at QVR Advisors in San Francisco, on Twitter. 19659003] "That would be my basic assumption."


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