By Doug Hagmann
Something happened this week that brings back haunting memories of the 2001 put options of airline stocks, except this “bet” is against the entire U.S. economy. This week, an anonymous trader bought 100,000 put options on the ETF, which is an acronym for an exchange-traded fund. One commonly traded ETF is XLF, which, in the most unscientific and basic terms, is a group of funds that is like a barometer for the stock market.
Should we be worried?
I asked this stockbroker if us normal people, those with our life savings stashed in a small coffee can in the back of our kitchen cupboard, should be concerned.
“No, of course not, not unless the trader is correct with the $11 million bet. That means that there would be crash… er, I mean a significant downward market correction. If that happens, then we’ll all be looking at huge losses that could nuke the market and have a domino effect across the financial board.”
“Of course we should be worried!” This could be the opening salvo of an economic collapse that everyone in the media and our elected officials are saying won’t happen.
