Will the Market Break Further?
Stock and debt markets around the world have been on shaky ground the past three weeks and some traders believe that the worst may not be over. On Friday, though we did close positive after being down significantly, one trader made a large bet in the PowerShares QQQ Trust (NASDAQ: QQQQ). This ETF, which tracks the Nasdaq 100, saw 24,000 of the April 41/36 puts spreads purchased for $1.03.
With the PowerShares QQQ Trust trading at $42.90, this trade will only become profitable once the Nasdaq 100 falls another 5.4% and will take a maximum gain if the ETF is right at $36 on expiration.
This may very well be a large institution placing a high beta hedge on technology holdings, but the idea that the large player is giving such a high probability of the ETF falling another 10% or so is something to keep in the back of one’s mind. We may still be in for a bumpy ride.
