Who Traded 55,000 Bear $30 Puts Tuesday?

Updated from 2:27 p.m. EDT

This past Tuesday, when Bear Stearns(BSC Quote) was trading around $65 a share, there was huge put volume in the March $30 strike.

Over 55,000 contracts traded that day at an average price of 15 cents a contract. This is an extremely unusual trade in terms of the number of contracts and how far out-of-the money those options were at the time. This begs the question of why someone would execute such a transaction.

First, it's important to understand that buying a put gives you the right to sell the stock at the strike price. So to buy a put that requires the stock to decline over 50% is essentially a bet that the company is possibly on the brink of going out of business or about to deliver some terrible news. ...