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- An anonymous bet of the S&P 500 has triggered excitement in the options market
An anonymous bet of the S&P 500 has triggered excitement in the options market
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Loading...An anonymous trader caused a stir in the U.S. equity options market on Monday with a massive bet that recalled Warren Buffett's famous wager on global stocks more than a decade ago.
The trader sold 19,000 put options on the S&P 500 Index obligating him or her to buy the market benchmark at 2,100 on Dec. 18, 2020, data from New York-based options analytics firm Trade Alert showed.
As long as the index doesn't drop more than 22 percent from its current level of 2,582 by that date, the bet will earn the trader roughly $175 million in premiums.
Buffett's Berkshire Hathaway sold billions of dollars in stock index options between 2004 and 2008, betting that markets would rise over the next 15 to 20 years. Although the trades were made anonymously, they were eventually disclosed in regulatory filings.
Berkshire has taken in more than $4 billion in premiums on the options. The holding company has other contracts that have not expired, including a final tranche that will settle in 2026.
While Monday's sale was nowhere near as large as Buffett's, the trader could still lose more than half a billion dollars if stocks turn sour over the next couple of years.
For example, if the S&P 500 loses 34 percent of its value by Dec. 18, 2020, the trader will rack up a loss of about $558 million, according to a Refinitiv analysis.
The market has been volatile in recent months, with the S&P finishing 2018 nearly 20 percent lower than its record high in September, although it has recovered half that ground since.
Source: CNBC
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