Some clever investors may have turned $8000 into $500,000 in a couple of days this week by buying the puts of Bear Stearns, a company that had a few problems this week. Steven Smith in The Street:

Tuesday, when Bear Stearns was trading around $65 a share, there was huge put volume in the March $30 strike. Over 55,000 contracts traded that day at an average price of 15 cents a contract. This is an extremely unusual trade in terms of the number of contracts and how far out-of-the money those options were at the time. This begs the question of why someone would execute such a transaction…these options expire on March 20, so that left only 10 days for some event to occur that would cause these puts to go into the money and have some value…those $30 puts…topped out at $9.40 a contract.

Maybe they were just lucky.

This entry was posted on Saturday, March 15th, 2008 at 1:18 am and is filed under General, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.