by John Olagues
April 16, 2008
Editor’s Note: John Olagues is the owner and principal consultant for Truth IN Options and a recognized authority on listed and employee stock options. After graduating from Tulane University in 1974 John applied his B.A. in mathematics and his competitive spirit to the real world of stock options. In 1976, John became a member of the Pacific Stock Exchange in San Francisco trading and managing options positions in scores of different stocks. John joined with Blair Hull to create Options Research, the first service to provide theoretical options values to market-makers and to the general public. In 1980, he became a member of the CBOE, where he personally traded more options in more diverse situations than any other trader.
In this article John makes the case that the Bear Stearns collapse was artificially created so that insiders could take large short positions in Bear Stearns stock prior and so that J.P. Morgan would in effect be paid $55 Billion of US tax payer money to shore up themselves and to buy Bear Stearns.
Massive buying of puts and shorting stock in Bear Stearns
On March 10, 2008, the closing price of Bear Stearns was 70. The stock had traded at 70 eight weeks prior. On or prior to March 10, 2008 requests were made to the Options Exchanges to open new April series of puts with exercise prices of 20, and 22.5, and a new March series with an exercise price of 25.
Their requests were accommodated and new series were opened March 11, 2008.
Since there was very little subsequent trading in the call series with exercise prices of 20, 22.5 or 25, it is certain that the requests were made with the intention of buying substantial amounts of the puts. There was, in fact, massive volumes of puts purchased in those series which opened on March 11, 2008.
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