Thursday, July 14, 2016

CNBC's Seven Million Dollar Man

July 14, 2016
CNBC: The $7 million bet that homebuilders could collapse

The bears are about to bulldoze the homebuilders — according to one trader.

Trader's name? Unknown. Trader's real reason for making the trade? Unknown. Could be a bear. Could be a bull buying insurance against a decline. Could be part of a bet on increased volatility. The only person who knows for sure is the anonymous trader.

Strike one.

In an eyebrow-raising wager Wednesday, someone purchased 15,000 of the XHB (NYSE Arca: XHB) Homebuilder ETF August 34-strike puts for 45 cents each. Since one options contract accounts for 100 shares of stock, this is a nearly $7 million bet...

15,000 x $0.45 x 100 = $675,000

$675,000 is nearly $700,000, not $7 million.

Strike two.

The ETF is already down more than 11 percent from its 2016 high hit June 9.

According to Yahoo Finance, the high on June 9 hit $34.66. XHB has been above that price all day. Where's the 11% loss?

Strike three. You're out.

According to Yahoo Finance, the previous high for 2016 was actually $35.03 on June 8, not June 9.

Strike four. You're still out.

But hey, The Seven Million Dollar Man's bet sure was excellent clickbait. Right? And isn't that all that really matters? Certainly enticed me to post something on my blog!

Forehead. Desk. Whack. Whack. Whack.

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