Was it Fallout3?
Sounds like Jan 5th will be your New Day!
Nice post Eliezer. Fascinating, really. It would be very interesting to see this theory tested.
Though one problem is that you assume that Monday's close + 777 is the "neutral" starting point. Despite the fact that the bailout proposal wasn't made public nor finalized until Sunday night, we can expect the market to have anticipated some form of bailout with some likelihood of passage long before Monday. So we'd have to go back a bit further.
Writing call options for many years in the future wouldn't pay 100 to 1, but would put money in your hand now. The big problem is that YOU can end up having to pay 1000 to 1 or 100 to 1 or whatever, essentially unlimited amounts of money, if your bet is wrong.
You can buy put options for X years into the future. That has limited downside (you can only lose your initial investment, no more) and can appreciate 50 times (I don't know about 100...). However, I don't know how the market for these would react to a "long slump," ie, they may not appre... (read more)