To The Moon

If an institution shorted ahead of time and then closed the position on the day of the regulatory announcement, it could be a coincidence. But it must not be a coincidence that this is happening a second time, especially with a set of options orders of more than 10,000 lots.

It happened a second time on May 3rd.

Previously on this article:

• If you win $10 million in the lottery, will you continue spend $5 million on the lottery?

• Tesla's stock price will drop at what price? Here are a few tips on how bears think

Just to recap, I featured in these two posts an institution that bought 50,000 hand options $XLF 20230616 32.0 PUT$ on the day of the February 2 FOMC meeting. And so it went for a month. On March 7, after Powell appeared before the U.S. Senate Banking Committee to deliver his semiannual monetary policy report and delivered a hawkish speech, Silicon Valley Bank plunged 60 percent on March 9, leading a broad plunge in banking stocks. The Philadelphia Bank Index fell 7.7 percent and the XLF plunged 4.06 percent.

The bankruptcy of Silicon Valley Bank on Friday was announced at the end of the week when the U.S. government took it over, in a multi-agency effort to secure customer deposits. This institution closed the position on Monday.(As shown in the figure above, the first green column represents opening volume and the second green column represents closing volume.)

Instead, roll to a lower strike price: $XLF 20230616 28.0 PUT$

And that gives me the title of my previous post: If you win $10 million in the lottery, will you continue spend $5 million on the lottery?

But now that the lottery ticket I used in my title is not accurate, it's not manna from heaven. The collapse of a small bank is more like a premeditated short selling, point-to-point precision bombing. If the macro is a highly dry haystack, the institution is the one flicking cigarette butts on the haystack.

The institution continues to trade, and yes, they are rolling again.

On May 4, White House press Secretary Karine Jean-Pierre told a briefing that the Biden administration is paying close attention to market developments, including short selling pressure on healthy banks.

On the same day, Securities and Exchange Commission Chairman Gary Gensler said the agency would address any form of misconduct that could threaten investors or markets. 'As I have said, at a time of increased volatility and uncertainty, the SEC is exceptionally focused on identifying and prosecuting any form of misconduct that could threaten investors, capital raising, or the markets more broadly,' Gensler said in a written statement.

And on May 3, the day before the administration official spoke, $XLF 20230616 28.0 PUT$ was closed. But instead of a bearish buy put, we have a very modest sell put strategy:

• sell $XLF 20231020 28.0 PUT$

The option expires on October 20, 2023. The total volume of the option was 85,000. The option premium is 5.78 million. In other words, traders are no longer bearish, and instead believe that the XLF will not fall below $28 before October 20.

What does that mean, my friends?

If you simply think this institution is changing its short strategy because it thinks banks can't go down without a bottom line because government regulators are meddling in the market, you're probably in the first tier.

This is from an institution that fled before the regulatory announcement, suggesting that the US government may be getting serious. What it should do is not only run, but also show its loyalty and stabilize the market.

• sell $XLF 20231020 28.0 PUT$

The expiration date on this large order is quite surprising. From a macro perspective, the best sell put date is June 9, a week before the next FOMC meeting, which is the date I mentioned in my article on Saturday. Given the extraordinary number of volatile factors this year, it would be better for investment dealers to shorten seller maturities to better control risk.

But the agency chose October instead of short-term benefits, a regulatory statement: I'm on the side of market stability, and relatively long-term, and you don't have to beat me up every month.

Some people might wonder if the best way to invest isn't to buy stocks directly?

But nobody is buying stocks honestly. sell put is more flexible. Institutions won't take over until they fall below $28 on October 20, and they won't net $5.78 million. In addition, because the sell put requires margin, the sharp fluctuation of stock price will lead to margin increase, and the sharp fall and rebound of XLF stock price is also bad for institutional holdings, so this institution is completely on the side of stabilizing the market this time.

And so the banking crisis ended again. This time, the big bears of the bank stock have expressed loyalty, and how can the small bears?

For our individual investors, this big order is of great reference significance. Regulation would ensure stability in the overall financial market, but it would still not regulate the rise and fall of individual financial institutions. Small banks will still be thundering, but the logical path that continues to cause XLF to break below 28 is likely to fail.

You can sell put XLF, but better yet, sell put big banks. $JPMorgan Chase(JPM)$ $Bank of America(BAC)$ $Citigroup(C)$ $Morgan Stanley(MS)$ $Goldman Sachs(GS)$

What is too big to fail?