Traders took an early swipe at Lehman, with chatter circulating that it may be next to suffer a similar Bear Stearns-type death spiral. Company is expected to report earnings tomorrow morning and saw its share price down nearly 50% at 1:22pm, the peak of the frenzy to sell stock. In addition, the options exchanges listed strikes down to $2.50 ? a bad omen. Options flow totaled nearly 7 times typical levels, with 392,000 puts and 226,000 calls changing hands. The flow was concentrated in very short-term March 40 Puts, which traded more than 35,000 contracts with buyers paying up to $5.79, as well as the downside April 20 puts, where nearly 30,000 traded in two-way flow and implied volatility levels touched a staggering 340%.
About the Author (Author Profile)
Henry Schwartz is the president of Trade Alert LLC, a provider of real-time options analysis tools to leading Wall Street firms. His systems analyze hundreds of thousands of transactions per second to help professionals identify and interpret market activity in real time, supporting informed trading decisions and intelligent idea generation. He has held institutional trading and management roles with Bank of America, Bear Stearns, Salomon Brothers and the Hull Group, and made markets on the CBOE and AMEX floors in the US, and EUREX and MONEP overseas. Prior to founding Trade Alert, he led the electronic market-making group at Bank of America coincident with the launch of the International Securities Exchange. He received his bachelor’s degree in Economics from the University of California, San Diego and his MBA from NYU’s Stern School of Business.