Painting the Tape, Bear Stearns Style

I might be mentally deranged, but so are the best traders/managers on the Street. And while I don't put myself in that company, I think some of them might agree with my take on the Bear Stearn's options
trade.

Clearly Bear was wounded, but a confluence of events, including an email reportedly sent from Goldman Sachs, were the catalysts that finished off Bear. But with Options Monster and every two-bit trader seizing on unusual put activity in the options market, it is not a stretch to say the person who put on a small out of the money options trade knew it would get an inordinate amount of attention.

The 57,000 puts that traded March 11 at the $30 strike price and the 1,649 that traded at $25 were collectively worth about $1.7 million, Bloomberg data show. Each put is equal to 100 shares of stock. Bloomberg

In my mind, anyone who argues otherwise is missing the point of the trade. It might have been a small trade, but it was worth a shot. It created suspicion, and panic. Was it the work of the Human Piranha? It is no surprise that copycats tried it with Lehman Brothers, but that is another story.

It wasn’t insider trading, or some other stupid theory being bandied about.

But it was perhaps the single greatest example of painting the tape, ever. And then it all fed on itself.

Beautiful, wasn’t it?

Case Closed.

Bringing Down Bear Began as $1.7 Million of Options
Bloomberg

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