The Most Bearish Guy in the World?

A hedge fund manager friend pointed out in an email to me earlier today that he may have wandered across the most bearish guy in the world: He’s hanging out in waaaay out of the money S&P 500 put options.

The most actively traded Dec 2011 S&P 500 put option – the right but not the obligation to sell the S&P 500 at a specific price by a specific time – is the $50 listed strike. As my friend pointed out, someone recently paid $0.25 to buy that $50 put option on the S&P 500. The most he can make on that uber-bearish option is $50 less the purchase price, or $49.75, for a 199:1 ratio — assuming, of course, the S&P 500 goes to zero by then.