Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The Smart Money is Going short in the Options Market

|Includes: SPDR S&P 500 Trust ETF (SPY)
The market has been buzzing about an enormous options position that has been put on by one of the major hedge funds, betting that that the S&P 500 goes out with a swan dive at the end of 2009. The trade involves going long 120,000 S&P 500 December 950 puts, and going short 240,000 December 820 puts, a strategy known by pros  as a “bear put ratio.” For newbies to the option world, this means the player would automatically go short $2.85 billion worth of stock if the index goes under 950, then goes long $5.70 billion of stock if the index drops below 820. I don’t think this is a trade someone did while sitting at home in bed with their Imac on their lap watching Lost on TV. The position generates a maximum profit of $390 million on December 18 with the S&P 500 at 820, just in time to jump on your G5 for a ski vacation in Aspen. It can be strapped on today for a cost of only $7.5 million, or $62.50 if you want to deal in only a one lot. But the trade suffers accelerated losses below 820. If you want to see the deep background on this trade, please click here . Looks like it’s time for me to download new bear photos from Google.