Shares of Lehman Brothers Holdings (LEH: sentiment, chart, options) have plunged nearly 6% so far today, more than erasing Friday's gains on buyout speculation. Unfortunately for LEH, a top South Korean regulator threw a wet towel on Korea Development Bank's (KDB) buyout hopes this morning. According to reports, the regulator said that KDB should only be a "cheerleader" of such a deal, while letting local private banks take the lead.

"I think that KDB might have considered forming and leading a consortium (to buy Lehman Brothers)," Financial Services Commission Chairman Jun Kwang-woo told reporters. "But it appears burdensome for a state-run institution to play a leading role (in the purchase of a foreign company) and take risks which may be more than financial."

For those of you that follow my daily Options Update column, today's news could have an impact on last week's speculative LEH call buyer and put seller. For one, the hypothetical call buyer is certainly feeling a bit of pain today, as the September 18 call that was purchased at $1.25 (or $125 per contract) is trading at $0.69 at last check, a loss of more than 81%. Keep in mind that LEH has to rally above $19.25 per share for this position to reach breakeven.

Meanwhile, the hypothetical trader of the October 12.50 put-sell position is sweating a little bit more today, but the position is still out of the money. For this trader to keep the full premium of the sold put, LEH needs to finish above $12.50 on October 17. Today's sell-off is a bit nerve racking for the put seller, but the position remains sound... for now.