I Missed Out on a 517% Single Day Return

Yesterday I wrote about the Bear Stearns buyout announcement.  Had I been able to put in my options trade for BSC last night it would have worked out to a fat 517% return in mere seconds at the opening bell this morning.  As predicted the stock fell from $30 a share to $3.20 per share.  The March 19th puts with a $25 strike price went from $4.10 up to $21.20 in a matter of seconds at the open.  If I put in my order overnight I may not have gotten my trade done at the perfect price but I almost certainly would have still tripled my money.  My investment of $4,100 could now be worth $21,200.  I missed this boat this time, but it is still nice to know I made the correct call and would have made out like a bandit if I'd had the foresight to get my brokerage account approved for options trades.  Next time I won't be caught ill prepared. 

Please read last night's post to fully understand the how, what, and why of the options investment.  It will explain thing in more detail. 

I'd also briefly like to touch on the shady nature of this whole deal (which of course I was more than happy to try and cash in on).  It has also come to light that there were a number of very suspicious trading trends in BSC and its options in the 7-10 days preceding this announcement.  For example, there was a surge in volume for the $30 strike price March 19th options about a week ago that defies most logic.  The price charged from $0.65 to $3.25 and then to $4.10 in the week leading up to the announcement.  This very odd for an option that is both set to expire this Friday and way out of the money.  People who had caught wind of a potential crash would be the only ones likely to bid up the options to that degree and explain the sizable spike in options volume. 

Look for the SEC to investigate the sweetheart deal JP Morgan is getting ($2 per share is only $0.02 on the dollar based on 4th quarter 2007 equity of $11.7 billion), the potential insider trading, and the possible accounting fraud or mismanagement that led to such a massive destruction of shareholder value.  That's all for now.  Thanks for reading.