Is Donald Trump’s erratic behavior fueling a business model? Some Wall Street options traders are beginning to suspect so. They’ve taken note, with increasing alarm, of people making strange bets tied to Trump’s actions and then cashing in bigly when the odd bets pay off. “If you had the ability to make hundreds of millions of dollars, or billions, and you knew how to hide it and it was impossible to find, wouldn’t you do it?” a longtime Wall Street options trader asks me sarcastically.
There is an old saw on Wall Street about how if you could somehow get tomorrow’s Wall Street Journal today, you could make a fortune. Advance knowledge of presidential actions might provide a similar advantage, and some unusual trading patterns are fueling gossip and suspicion on the Street.
Take, for example, what happened in the last 30 minutes of trading on Friday, June 28 at the Chicago Mercantile Exchange. By that time Trump was already in Osaka, Japan—which is 14 hours ahead of Chicago—where he would meet for more than an hour with China’s President Xi Jinping. According to the trader, who has decades of experience trading options, while they were meeting on Saturday morning, someone, or a group of people, bought 420,000 so-called “e-minis”—electronically traded futures contracts tied to a wide range of stock indexes—in the last 30 minutes of trading in Chicago on Friday afternoon. The big bet could appear to be that Trump might announce a deal of some sort with Xi about the tariff negotiations, and that on Monday morning, or soon thereafter, the S&P 500 stock index would trade up.
The total volume Friday of the September e-minis was a little more than one million contracts, so a purchase of 420,000 contracts, or about 40% of the day’s volume, in the last few minutes would likely be noticed by astute market watchers. Charts of the e-mini trading that day clearly show a spike up in volume in the last 30 minutes of the day. “What was going on in the world?” the trader asked rhetorically. “At that time? The G20. What if Putin or Xi or MBS knew something positive would be announced on Sunday? Heck, just 10% or 40,000 [e-minis] bought would be $120 million today. Maybe someone got lucky—or listened in to those private meetings.”
On Saturday in Osaka—after the market had closed in Chicago—Trump emerged from his meeting with Xi and announced that the contentious on-again, off-again trade talks with China were back on. “We discussed a lot of things, and we’re right back on track,” Trump said at the news conference following his private meeting with Xi. “Who knew Trump would offer a truce with Xi?” the options trader wondered. “Some lucky trader? Are there any hedge fund traders that might have been tipped off? A simple ‘don’t go short this weekend’ might send a signal to load up on the long side.”
On Monday morning, the market reacted positively to the news that the U.S. and China would resume trade talks, and has kept moving up since, as Trump is always happy to note. On Thursday, June 27—before the G20 meeting began—the S&P 500 index closed at about 2,915. Over a week later, the S&P index is at just below 3,000, an increase of around 84 points, $4,200 per e-mini futures contract. (Each point increase in the index is worth $50 per option.) Whoever bought the 420,000 e-mini options contracts was sitting on about a $1.8 billion profit. “Someone got very, very lucky,” the trader told me.
Traders are always trying to figure out why other traders make the decisions that they do—and whether inside information is a possible explanation. Last Tuesday, for example, someone bought 1.5 million shares of Symantec Corp., the cybersecurity firm, in the final minutes of trading at $22.10. Two hours later, news came that Broadcom Inc. was reportedly considering a $15 billion acquisition of Symantec; the stock hit $27.89, within minutes, according to the trader. “That’s a quick $9 million profit,” the trader told me. “Then you look at the [Symantec] options bought in the past week at prices as low as one penny. Those will be $2 today—200 times [your] money. NICE. Does SEC or SDNY [Southern District of New York] look into this? Rigged system? Someone is very, very lucky? Or massive insider trading?”
He also said he’d seen some bizarre trading around market-moving speeches given recently by Jerome Powell, the chairman of the Federal Reserve. “What if someone had a copy of Powell’s speech to the public an hour prior to the news release?” he wondered. “And knowing this information would negatively affect the stock market bought $70,000 of puts and made $7 million three hours later? What if it was a secretary at the Fed who typed up the speech, and she told her boyfriend? What if people with top security clearances read these documents prior to release, and knew someone who could do a trade, and no one would know? Make $100 million in a day, and put it in a secret account in Switzerland. Or put in a state bank in Russia or China or Saudi Arabia, where they had friends who would protect their identity? Could that happen?”
In 1980, Michael Thomas, the former Wall Street banker—he was a partner at Lehman Brothers, which his father once ran—turned expert Wall Street satirist, published his first novel, Green Monday, about a financial wizard and a Middle Eastern oil minister who successfully manipulate oil prices and make a fortune. After hearing the Chicago trader’s thoughts about the fortune apparently being made trading S&P futures, I contacted Thomas to see if he thought the book he released nearly 40 years earlier might have been prescient. He reminded me of the plotline of how a country like Saudi Arabia raises the price of oil, knocking U.S. stock markets for a loop. Then the leaders of the country load up on devastated U.S. equities. “When they’ve got a multibillion holding,” he said, “they announce a big cut in price of oil. The market goes apeshit.” He paused for a minute and said, “I would boast that Trump has read it, but he can’t read!”
This article has been updated.
