As the Bear Stearns witchhunt continues throughout the MSM and reverberates in the blogosphere, I can’t help but ask the question.  Who is the co-conspirator(s) in this transactions of weapons of mass destruction?

Just like for a murder to happen there has to be both a body and a weapon, for a transaction to happen there has to be a buyer and a seller. Who aided and abetted this fugitive speculator?  Inquiring minds want to know.

From Bloomberg,

“Even if I were the most bearish man on Earth, I can’t imagine buying puts 50 percent below the price with just over a week to expiration,” said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. “It’s not even on the page of rational behavior, unless you know something.”

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.

“That trade amounted to buying a lottery ticket,” said Michael McCarty, chief options and equity strategist at New York-based brokerage Meridian Equity Partners Inc. “Would you buy $1.7 million worth of lottery tickets just because you could? No. Neither would a hedge fund manager.”

Who is the bastard (or bastards) that sold $1.7 million (actually it was $32  million but who’s counting) worth of lottery tickets to such a dangerous individual.  Didn’t they know that this person was looking to take down Bearn Stearns, or at least had rigged the lottery in their favor?. Shouldn’t they tried to save the company?

Was there an offer out for 57,000 contracts?  If so for how much?  Did this evil option seller peddle large amounts of apparently dangerous derivatives on various stocks regularly at cheap prices?  If so, who are these buyers?  We should find them before they blow up another company.  They are quite dangerous.

Or did the buyer come to the seller looking for such a large amount of these weapons?  Why didn’t the seller perform due diligence?  If this is such a rare occurence something must have appeared fishy.  If buying those options was so strange, why didn’t the seller(s) question it or why did they have an offer waiting to be hit up by an unscrupulous buyer?   Perhaps the seller(s) had his computer running his trades for the day and was just negligent.   Are they still to blame?

Perhaps we need control or a mandatory waiting list to buy puts.  The chance that a put-buyer with grand aspirations of killing a stock gets their hands on a huge lot of them is just a risk we shouldn’t take.  To protect ourselves from the greedy put-sellers who sell these things to criminals we should put in place laws outlawing it all altogether.

Joking aside, the whole contention that the put buying took down Bear Stearns is stupid. While the trade obviously looked fishy, it wasn’t fishy enough to prevent it from being executed. Although it probably was insider trading, things like this happen in the options market all the time on the upside and downside.  If this is such an obviously strange thing to do, isn’t it more likely than not that the person knows something.  Moreover, if this transaction itself is to blame, aren’t the sellers responsible for giving the buyer the liquidity (and causing it to take place) more guilty because they should have known that such an odd transaction probably was insider trading.  What if they realized this and removed liquidity, and this ended up just a “in-the-know” bid on the order book - never getting executed?  Wouldn’t the fact that the bidder “knows” something imply its inevitability anyways?

Like those companies suing the short-sellers, its just another attempt to revise history, drawing attention away from the wrongdoing and laying blame on those who profit when they screw up. Nobody is to blame for the implosion of Bear Stearns but those involved in the underlying company - Bear Stearns.

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