Friday, April 16, 2010

And GS Outdid Them All..

Goldman Sachs' (GS) April put options, that is. It must be the theme of the past two weeks: an option that was a penny or two a piece one day jumped 1200% (Citi's $5 call, from 1 cent to 13 cents), 6400% (Palm's $5 call, 2 cents to $1.30), and today, boy I can't even calculate. Goldman Sachs' April $175 call went from 1 cent to $19 dollars, courtesy of SEC.

It was a rather quiet morning on an Op-Ex day. The market started out slightly down, and was climbing into a positive territory - another miracle up-day, I thought, when all of a sudden the @#$% hit the fan. It seems to have started at 10:36 AM EST.

This is the Dow intraday chart:

This is the intraday chart of GS:

This is the intraday chart of GS April $175 put option. Someone bought a huge chunk at 10:36 AM, and unload quickly, and probably bought again. Rinse and repeat. The option went as high as $19:

This is the intraday chart of GS April $175 call option. It was solidly in the money, until all of a sudden it collapsed. Call option sellers must have been ecstatic. This particular option was worth $25 in October 2009. Today it opened at $8.74, and ended worthless:

But this GS put option play doesn't qualify as "shoulda, coulda" trade for me, because I didn't even think about putting GS yesterday or even this morning. I had no idea that SEC would come out today, on an Op-Ex day, to file civil charge against, of all people, Goldman Sachs for defrauding the investors with the CDO it crafted with the hedge fund manager John Paulson.

What I saw first was a big, big red candle on the Dow intraday chart, around 10:38 AM. I had no idea what was going on. When I finally got the news 10 minutes later, GS was already down to $170, from $182. $175 put option had already gone from 1 cent to over $11.

But some people made a filthy amount of money in a few short minutes. There are rumors that Goldman Sachs traders were shorting their own stock as well as index futures before the news broke. They don't trade, those Wall Street bankers. They simply profit from prior knowledge and insider information. The playing field is not only NOT level, but there is NO playing field. IMHO, that is. Not based on evidence, or anything else but a hunch. Henry Blodget at Yahoo Tech Ticker/The Business Insider seems to agree with me on that..

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