A few weeks ago, someone noticed an enormous open interest position in the 700-strike calls on the S&P 500, for September expiry. These are pretty much useless – the equivalent of just being long the index – unless the S&P were to drop about 50% in the next month. So, of course, that’s what everyone on the intertubes assumed was going to happen. OMG OSAMA BIN LADEN IS INSIDER-TRADING, etc. etc. etc.
Two reporters at TheStreet.com have finally injected a much-needed dose of sanity.