Lehman Is Not A Bear - Short Killer

Posted by Kris | Saturday, April 05, 2008 | | 1 comments »

One of the signs that Bear Stearn (BSC) was in problem were the mounting put options volumes that were huge compared to the open interest the day before the big plunge. The atmosphere were already very bearish and a spat of denial on liquidity problem came from the Bear Stern camp did not really help the situation.

The doomday came when the FEDs announced that JP Morgan will be given the honor to rescue Bear Stern with a price tag of USD2!!!
When I heard the news, I was in total disbelief. Here a once giant banking & investment firm is being "fire saled" for a mere USD2.
Those buying put options on Bear is literally laughing all the way to the bank.
Those who missed out one of the greatest short opportunities of the year where excited when Lehman, another banking giant wounded by subprime is rumoured to be the next in line to be bailed out by the FEDs. Puts options volume were soaring once again the day before Lehman will be announcing their quarter earning report. The stock were plunging to a low of ~USD20 from ~USD45 with anticipation of another fire sale.
Thunder never strike the same place twice - the old adage were holding true when Lehman announced a much better earnings than expected thus sparking a incredible intra-day rally and the Dow Jones followed suit. A lot of shorters lose their shorts that day...Lehman was proved to be an effective short killer on that fateful day.

Currently ,Lehman is suing a Japanese investment firm on grounds that they were cooperating with hedge funds to drive down the company's stock price.


1 comments

  1. Stargazer // 11:49 PM  

    what has that girl pic got to do with this post?