What are the options trades in Lehman Bros. stock saying about the investment bank's future?
"The question, I think, on everyone's lips is whether we're seeing a Bear Stearns-like setup in Lehman Brothers," said Rebecca Darst of Interactive Brokers on CNBC's "Squawk Box." "And so we're going to ask ourselves, 'Is implied volatility in Lehman very high?' Yes, it is, even after yesterday's relative upside for Lehman shares, the options market is looking for 75 percent more price risk to Lehman shares over the next 30 days ... The preponderance of put trading in Lehman Brothers suggests that this risk lies to the downside..."
Puts are options that give the buyer the right to sell a stock at a certain price at a specific date in the future. Traders often buy them in hopes of using them to sell stock at above market prices at a later date.
Darst rebuffed speculation that options traders were betting on the ultimate demise of Lehman , and by doing so actually moving the market toward that end. Some argue that phenomenon helped seal Bear Stearn's fate. (See Darst's full comments in the accompanying video).