Roberta Yafie at the New York Post says everyone was wrong about the hundred dollar purchase heard round the world. She tells us that Richard Arens was the seller of the now famous barrel—not the buyer, as previously reported—and his supposed client is commodities conglomerate Cargill. Her source is “one NYMEX source”
Do you buy it? We’re not sure we do. Does Cargill make minimum order purchases from locals at above market prices? Sounds a bit like Coca Cola buying a really expensive cup of lemonade from your cousin's card board stand just so Cameron can be the hit of the cul-du-sac. Our feeling is that it's most certainly the other way around, with Arens as the cowboy with a strong desire for a legacy.
Crude Trading [New York Post]
Posted by jag , Jan 07, 2008 5:20PM
Well, at least this would be consistent with NYMEX's statement that the order came from "a commercial buyer"
Posted by Exotic Ed , Jan 07, 2008 5:41PM
Does anyone know if there were any barrier (Knock Outs) at 100.00 on Crude... Could have provided someone with an incentive to drive price higher...and print a small size at a specific level...
Anyone here old enough to remember the Veny Bond Up and In Put trade from 15ish years ago which pitted one large US Broker (defending the barrier) against a large US HF.. buying to trigger the barrier... fun and games which ended up with lawyers
Posted by The Trader Apologist , Jan 07, 2008 9:11PM
Hold on! You have to remember that Nymex pit traders will do whatever it takes...even lose their own money if they have to....in order to provide the best service possible for the general trading public.
Posted by jon smith , Jan 08, 2008 8:12AM
where can i find more info on the "Veny Bond Up and In Put trade"
searched google, cant find anything
Posted by Exotic , Jan 08, 2008 9:16AM
It seems at least as likely that option traders or
option trading desks would manipulate stock prices, because stock price manipulation
produces immediate profits for option investors. The benefits to mutual fund
management companies, in contrast, are delayed until after future increased
investment flows into funds. In addition, the benefit to mutual fund managers is
attenuatedby the fact that increasing returns in one period through stock price
manipulation comes at the cost of reducing returns in the next period. Second, in late
November 1994, a hedge fundope ratedby well-known fundman ager Michael
Steinhardt bought from Merrill Lynch $500 million of ‘‘knock-in’’ put options on
Venezuelan Brady bonds that expired in early January. By early December there was
open warfare between the hedge fund that was trying to drive the price of the
underlying bonds up to the knock-in level and Merrill Lynch, which was trying to
keep the price of the bonds below the knock-in level. On December 9, as much as
$1.5 billion of the $6.5 billion of face value outstanding changed hands. The head of
emerging market debt trading at a big European bank remarked ‘‘nobody could
have imaginedthe amount of money’’ that each side would spendto muscle the
market in its favor. (Sesit andJereski, 1995). Although the market for listedeq uity
options is clearly different along a number of dimensions than the over-the-counter
market for barrier options on Brady bonds, this incident lends credence to the idea
that traders of exchange-listed options may engage in stock price manipulation.
www.business.uiuc.edu/poteshma/research/niPearsonPoteshman2005.pdf