Replies to post #508540 on $Stock*Shop*Charts*News*Option$

[Tuff-Stuff]

Got an extra BILLION or so to float around???


Billion dollar bet on rate cut pays off

Date
May 8, 2013 - 9:46AM

It may go down as one of the great currency bets in Australian dollar history – a $US1 billion gamble on a Reserve Bank rate cut that has delivered a $US19 million ($18.65m) profit in 36 hours.

The beneficiary, if you believe the rumour mill, is investment legend George Soros.

Best of all, it appears the 82-year-old American pulled off the deal three times, all with different foreign exchange brokers in Asia, for a tidy profit of almost $US60 million.

Not bad for a bloke who, just three weeks ago, was wrongly declared dead.
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Soros is a Hungarian-American business magnate, investor and philanthropist, who has built a reputation over the past 25 years of picking the impact of government decisions on currencies and commodities.

Back in 1992, based on British government policy changes, Soros famously shorted the British pound, by using the German marks as his paired currency, earning a staggering $US1.8 billion profit for his fund. Black Wednesday – September 16, 1992 - is known as the day George Soros "broke" the Bank of England.

The world of foreign exchange trading is a complex one. Unlike selling short a stock, an investor can opt to sell a currency at a future date without needing to physically borrow the currency.

The investor simply enters into an agreement to buy or sell a currency for a predetermined price – a ‘‘short number’’ or a ‘‘long number’’ – on a specified future date.

By contracting to sell one currency, an investor is also contracting to purchase another currency, as currencies trade in pairs. When he famously broke the Bank of England, Soros needed to use the German mark to do so.

The action this time started on Monday, when a major foreign exchange (FX) trader in Hong Kong took a $US1 billion placement order for the Australian dollar, a ‘‘short number’’ of $US1.0373 and a settlement time of 36 hours - just after the RBA announcement.

Those trades were placed via Hong Kong and Singapore, and were believed to be placed by Soros Fund Management.

The Australian dollar was trading at $US1.0320 on spot markets at the time, but fell on the back of bad jobs and retail data.

Brokers – whether they be trading stocks or forex – are talkers. Not long after the $US1 billion was placed, the Aussie dollar slipped from $US1.0284 to as low as $US1.0222 in offshore trade, amid unconfirmed rumours that Soros was planning a raid on the dollar ahead of yesterday’s interest rate announcement.

‘‘Someone ... seems to be betting on a rate cut," said one Sydney-based FX trader yesterday. "I’ve heard the George Soros rumour ... a billion dollars sounds like a lot, but it’s not enough to move the Australian dollar and it’s not a lot for George Soros, but there is a play happening in the FX market. If it is him, it’s probably a bet on a rate cut. These days a billion bucks can’t do much to the Aussie.’’

ANZ current strategist Andrew Salter also said he was aware of the rumour of a short position on the Australian dollar, adding that the "appropriate position to have in the Australian dollar is short given the outlook for world growth and the outlook for the Reserve Bank".

The Aussie has, of course, been ripe for the picking.

Earlier this year, a HSBC global valuation found the Australian dollar was the most overvalued currency in the world, using data from from the OECD’s measure of purchasing power parity, The Economist’s Big Mac Index and the Current Real Effective Exchange Rate (REER) as compared to its five-year average.

The Organisation for Economic Co-operation and Development’s measure of purchasing power parity found the dollar was overvalued by 60 per cent.

Under the REER, the dollar was almost 12 per cent overvalued, while The Economist’s index found the current was overvalued by 12.2 per cent.

HSBC said in its report that currencies like the Australian dollar were facing headwinds given the so-called currency wars, which had seen countries such as the US and Japan use quantitative easing to lower their currencies’ value.

Soros sold out of gold investments late last year, sparking rumours that he would again be active in global currency markets. According to reports out of Japan, his investment company has made $US1 billion by shorting the yen between November 2012 and February this year.

It has all proved to be fairly prescient.

At 2.30pm yesterday, the RBA cut the cash rate by a quarter of a basis point. The Australian dollar plunged immediately to $1.0178 - giving the mystery currency gambler out of Hong Kong a margin of nearly 2 US cents on every dollar.

The profit, notched up in just 36 hours, topped $US19 million.

But it looks like the person behind it managed to pull off the deal three times.

‘‘I’ve heard the $US1 billion in Hong Kong was just one order. It was also done out of Singapore and a third foreign broker.’’

If it was Soros, then May has proved to be a better month than April – when news agency Reuters prematurely declared him dead, and accidentally published his obituary.

[Tuff-Stuff]

Most Active Options: Citigroup Inc (C), Ford Motor, and J.C. Penney
C, F, and JCP are seeing notable options trading activity today
by Karee Venema 5/7/2013 3:04 PM

Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Citigroup Inc (NYSE:C), Ford Motor Company (NYSE:F), and J.C. Penney Company, Inc. (NYSE:JCP). Here is a quick look at today's interesting activity in these options pits.

Citigroup Inc (NYSE:C) rallied to a two-year high of $48.27 today, prompting some speculators to bet on extended gains through week's end. The stock's weekly 5/10 48-strike call is one of the more sought after positions, where 8,398 contracts have traded at a volume-weighted average price (VWAP) of $0.42. The majority of these have crossed at the ask price, and volume is outstripping open interest, pointing to buy-to-open activity. With the stock last seen at $48.16, these calls are in the money (ITM); however, in order to be profitable, C must rise above $48.42 (strike price plus the VWAP) by the close on Friday. From a wider sentiment standpoint, it's been puts, and not calls, that option traders have been accumulating with some rapidity in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Citigroup's 10-day put/call volume ratio of 0.85 ranks in the 86th percentile of its annual range. Simply stated, puts have been bought to open over calls at a faster-than-usual pace.

Ford Motor Company (NYSE:F) has tacked on 0.7% today to trade at $14.19, and, as such, calls have easily emerged as the options of choice. Roughly 79,000 calls have changed hands so far, representing a 34% mark-up to the average intraday volume. By comparison, around 13,000 puts have crossed the tape. One group of traders is sitting just pennies away from profitable territory based on the bets they've placed throughout the session. Specifically, 3,060 of Ford Motor's weekly 5/10 13.50-strike calls have traded, mostly at the ask price. Implied volatility was last seen 6.2 percentage points higher, and data from the ISE confirms that a number of these positions were bought to open. The VWAP for the ITM calls is $0.70, making breakeven $14.20. Buy-to-open call activity is nothing new in F's options pits, per the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.75. Not only does this show that nearly four calls have been bought to open for every put during the past two weeks, but it ranks higher than 70% of similar readings taken in the past year, indicating a healthier-than-usual appetite for long calls over puts.

J.C. Penney Company, Inc. (NYSE:JCP) is bucking the broad-market trend higher today, with the stock feeling the weight of this morning's downbeat analyst attention. At last check, the equity has shed roughly 2.2% to linger near 16.55. Despite this technical setback, option traders are eyeing the stock's newfound perch atop the $16 mark to hold as support over the next several months. Nearly 1,800 of JCP's August 16 puts have changed hands for a VWAP of $1.73. The vast majority of these contracts have gone off at the bid price, and volume is exceeding current levels of open interest, indicating sell-to-open activity. In the best-case scenario, J.C. Penney will stay trading north of $16 through August options expiration, allowing the out-of-the-money puts to expire worthless, and the traders to retain the full potential profit, which is also the net credit received.

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

[EZ2]

U.S. can pursue case against Bank of America over mortgages

05/08 03:00 PM

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By Aruna Viswanatha

May 8 (Reuters) - A federal judge ruled on Wednesday that the United States can pursue parts of a civil lawsuit against Bank of America Corp (BAC:$13.045,0$0.145,01.12%) over its sale of toxic mortgages to Fannie Mae and Freddie Mac, boosting a largely untested legal theory the government used in the case.

Bank of America (BAC:$13.045,0$0.145,01.12%) had sought to dismiss the lawsuit, which seeks penalties under two laws. One is the False Claims Act, which is often used to target fraud against the government, and the other is the 1989 FIRREA law.
FIRREA does not yet have much of a track record in court, but the government turned to in the wake of the financial crisis as a potential means to target civil fraud involving financial institutions.

U.S. District Judge Jed Rakoff issued a two-page ruling that dismissed the claims in the lawsuit seeking penalties under the False Claims Act, but allowed the claims that seek penalties under FIRREA to advance. Rakoff, in New York, said he will explain the reasons for his decision at a later date.

The ruling comes as something of a surprise, since Rakoff at a hearing last month appeared skeptical of how the Justice Department had used FIRREA in its case.

The lawsuit, which blames Bank of America (BAC:$13.045,0$0.145,01.12%) for more than $1 billion in losses incurred by the government-controlled mortgage finance companies, accuses the bank of engaging in a scheme to defraud them through a program started at the former Countrywide Financial Corp, which the bank acquired in 2008.

FIRREA, or the Financial Institutions Reform, Recovery, and Enforcement Act, allows the government to seek civil penalties against anyone who commits a fraud "affecting a federally insured financial institution."

But in a trio of cases, banks including Bank of America (BAC:$13.045,0$0.145,01.12%) , Bank of New York Mellon Corp (BK:$28.31,00$-0.10,00-0.35%) and Wells Fargo & Co (WFC:$38.505,0$0.405,01.06%) have argued that the law cannot apply when the only financial institution affected by a fraud was the institution that allegedly committed the fraud.

Another federal judge in New York rejected that argument last month in a case against Bank of New York Mellon (BK:$28.31,00$-0.10,00-0.35%) , and allowed accusations that the bank overcharged clients for trading currencies to move forward.

A Justice Department spokeswoman declined to comment on the Wednesday ruling. A representative for Bank of America (BAC:$13.045,0$0.145,01.12%) did not immediately respond to a request for comment. (Reporting by Aruna Viswanatha and Jonathan Stempel; Editing by Gerald E. McCormick and Tim Dobbyn)