SEC probing options activity in Bear Stearns

The Securities and Exchange Commission is investigating the events leading up to the collapse of Bear Stearns (BSC.N), specifically a surge in options contracts betting that the investment bank’s share price would fall sharply, according to the Wall Street Journal

Citing people familiar with the matter, the paper reported the SEC probe focuses on a surge last week in “put” options that came days before the firm’s proposed sale to J.P. Morgan Chase & Co. (JPM.N) for stock now valued at about $278.5 million, or $2.32 a share.

A put option allows the buyer of the option the right to sell a certain number of shares in the company at a specific price within a set time.