Lehman next in line?

[Tulpen]

Stock is down almost 8% today.

Watch the put contract volumes, even $5 puts.

[*T*]

Re: Lehman next in line?

Could be, but yesterday's news.
I vote JP Morgan. Talk about volatility.

[jmdpet]

Re: Lehman next in line?

Bloomberg article on LEH option activity:

http://www.bloomberg.com/apps/news?p...G3VqE&refer=us

[Tulpen]

Re: Lehman next in line?

12% and dropping through new LOD.

[rj1]

Re: Lehman next in line?

Stock is down almost 8% today.

Watch the put contract volumes, even $5 puts.

I think there will be a propping organization on the part of the Fed and others. They can't afford to let anyone go right now and so they'd fight it tooth-and-nail.

So I wouldn't mind betting against those $5 puts and take those people's money.

[Guest]

Re: Lehman next in line?

Leeb ETF Trader Market Recap: (Stephen Leeb's ETF Trader)

The eye of the storm in the Western stock markets remains the banking sector. As much as we want to think that last Monday marked an important market bottom, it is the health of the banks that will tell the tale. And right now the way they act is not confirming a firm bottom.

Today, every active investor should watch the major components of the Financial Sector SPDR (XLF), and more particularly those of the AMEX Broker-Dealer Index (XBD). The amazingly fast collapse of Bear Stearns (BSC) demonstrates that investment banks with high exposure to credit products operate in a highly contagious and volatile environment; the fact that they may have survived the week gives you no guarantees for the future.

We analyzed all the components of the AMEX Broker Dealer index. In particular, we reviewed the implied volatility of their options. Implied volatility can be interpreted as the level of volatility the market expects from a particular security. If a stock has been volatile historically and the market expects it to keep moving violently in the future, its options would be very expensive as the implied volatility priced into them will be very high. And guess which component of the AMEX Broker Dealer Index had the most expensive options? No other than Lehman Brothers (LEH), with 87 percent of implied volatility priced in its options.

It is not hard to see why Lehman Brothers is viewed by options traders as "the next shoe to drop", as Lehman is the largest investment bank with dedicated exposure to fixed income markets where the today's financial storm is concentrated. The second largest was Bear Stearns.

If Lehman survives the credit crisis -- and we certainly hope that it will -- it can be expected to be less profitable in the future as the market for structured investment products like Collaterized Debt Obligations (CDO) has shrunk by half since 2006. The CDO market may shrink further when the regulators begin to lean on the industry in earnest. It is not far fetched to think that CDOs can actually be outlawed.

[ax]

Re: Lehman next in line?

I think there will be a propping organization on the part of the Fed and others. They can't afford to let anyone go right now and so they'd fight it tooth-and-nail.

So I wouldn't mind betting against those $5 puts and take those people's money.

Agreed, the play on Lehman was either the day before they went to $24, or on that day to put a strangle on as they bolted back to $46. UBS is as viable a candidate as JPM for collapse.....

[DemonD]

Re: Lehman next in line?

I think many people are forgetting about Merrill Lynch. Their books IIRC are worse than Lehman although of course it's within the realm of possibility that Lehman has more things blowing up right at the moment.

JPM will be the last bank standing, guaranteed. JPM is tied at the hip to the Fed, and the Fed tied to them, JPM can almost be considered the right arm and both legs of the Fed at this point. That means all the IB's must go down, C, BAC, and UBS go down before JPM.

Frankly, as long as we don't enter into a hyperinflation or hyperdeflation, I'm fine with letting the lot of the fraudsters, i mean gangsters, i mean banksters, all going belly-up. Of course there is a good chance of the inflation happening while saving the ganksters.

[Tulpen]

Re: Lehman next in line?

JPM will be the last bank standing, guaranteed. JPM is tied at the hip to the Fed, and the Fed tied to them, JPM can almost be considered the right arm and both legs of the Fed at this point. That means all the IB's must go down, C, BAC, and UBS go down before JPM.

I agree with that line of thinking.