Lehman Brothers (LEH, $3.99, down $3.26) is dropping another 45% within the first 30 minutes of trading this morning. Lehman did nothing yesterday to please Wall Street and looked baffled when reporting earnings. With no real “backup” plan or turnaround in place, the company reported a loss of $3.9 billion for the quarter and slashed its dividend. Yeah, way to give the Street confidence in saving your company’s stock price.

Lehman’s current crisis forced the company to report earnings earlier than expected but the company had to say something after its shares plunged almost 45% Tuesday. Add on today’s 45% drop and it’s easy to see why the stock has gone from $10 to $4 good buddy.

The deal or non-deal that fell through with the Korea Development Bank has pushed Lehman to the brink. We examined a strangle option trade on Lehman and here’s how we look. The October 7.50 puts (LYHVU, $4.40, up $1.80) have nearly doubled from Tuesday. The October 12.50 calls (LYHJV, $0.44, down $0.86) have gone the other way. If you sell the puts today, it covers the cost of the entire trade and you once again have a “free” trade. I mentioned we could get a $5 move in Lehman when the stock was at $10 on Tuesday so the trade is reaching its limit.

Rick Rouse