Critical Pathology

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Someone's going to be in a heap of trouble today. The someone is the moron who bought 500 Critical Path (CPTH Quote - Cramer on CPTH - Stock Picks) February 25 puts at 3:34 p.m. -- 26 minutes before the company imploded. Oh, I am sure, right now, that someone is high-fiving his colleagues, thinking that he just caught nine points on the downside. (Puts allow you to profit from the decline in a stock, and this one just got cut in half.) But he will find something worse than the IRS when he goes to cash in at the $50 window at the racetrack. He will find the SEC when he goes to cash in those Critical Path puts.

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The buyer of the puts just caught one of the biggest hits I have ever seen. Too big. This kind of win draws the authorities as surely as if you robbed the church bingo game. Ladies and gentlemen, let me give you my rules on this kind of trade: When you know something, when you know it is going to happen, you can't trade. Anybody who bought these puts knew something. And when you know something, you are finished. They will nail you. If you have insider information, don't trade on it. Period. You will get caught. You will get prosecuted. You will ruin your life. Pretty simple.

So, Critical Path put buyer, enjoy your high fives. You will never see a dime of those winnings.