The putative conspirators, whose name or names have not been made public, pulled off their heist with ease. They bought a bunch of what Wall Street calls "puts." A put is a piece of paper guaranteeing its owner the right to sell 100 shares of stock at a stated price within a specified period of time. In the case of this bank job, the period of time was as little as five days.
With Bear Stearns stock selling at over $60 a share, somebody bought the right to sell almost 6 million shares at $30 a share. To make money on these puts, the price of Bear Stearns stock would have to lose more than half its value fast. In fact, in the days immediately after the unknown person or persons bought all those puts, Bears Stearns stock dropped like a duck shot out of the sky, to a price of $10 a share or less. The persons behind the scheme then bought Bear Stearns shares at $10 or less and exercised the puts, thereby selling them for $30 and pocketing the difference.
How could someone know that in a matter of days the fifth-largest trading house on Wall Street would see the value of its stock drop to next to nothing?
Then with the price of stock still above $50, somebody bought puts giving them the right to sell the stock at five dollars a share--which is about what you would expect to be the price of the shares of a company in bankruptcy. Matsumoto quotes one broker as saying, "When you buy $5 strikes [puts] when the stock is trading over $50, you either have to be manipulating, or you have to have insider information." Another broker quoted in his report remarked, "Nobody in their right mind would buy that put unless you knew what was going down."
The timing of the purchase of the puts screams out that a well-placed person inside Bear Stearns was telling someone on the outside of the firm's increasing confusion and division. At a crucial moment when rumors were rife on Wall Street that Bear Stearns customers would not be able to withdraw their money, the stock market was hit by a large number of orders to sell Bear Stearns stock. That augmented the force of the rumors of insolvency already working to depress the price, even as panicky customers fell over one another getting their money out. There are too many disastrous coincidences here to be explained just by bad luck.
The name of the bearer of this bad luck remains hidden. A spokeswoman for the Chicago Board of Options Exchange, where the puts were bought, has refused to tell Bloomberg the name.
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