Readings: US subprime losses, ‘Bin Laden’ Options Trades, 250-point position in Nifty
BCA Research: U.S. Subprime Losses To Total /$200 Billion
About 60% of subprime mortgages carry an adjustable rate, and $650 billion will reset at a higher interest rate in the next 16 months. Even without factoring in a recession, we estimate that the losses on bad subprime and alt-A paper could amount to about $200 billion over the 2007-2011 period (1.5% of today’s GDP).
The Street: Dispelling the ‘Bin Laden’ Options Trades
The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month. Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won’t pay off unless the market undergoes an extremely large price move between now and the options’ expiration on Sept. 21.
However, Dan Perper, a Partner at Peak 6, one of the largest option market makers and proprietary trading firms, has confirmed that the trades are part of a “box-spread trade.”
Economic Times: Traders in Nifty options can take a 250-pt position
The new strike price interval for September contracts will give market participants greater flexibility in taking a call on indices that have option contracts.
Starting Friday, traders in Nifty options will be able to take a 250-point position on either side of the previous day’s closing. The changes will benefit Nifty option traders the most, as the current strike price interval of 10, in a format of 9-1-9 (9 strikes of interval 10 on either sides of the previous closing level) allows traders a limited view on the index, which is one of the widely-traded contract in the futures and options segment of NSE.
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