March 17 (Bloomberg) -- Lehman Brothers Holdings Inc. fell in New York after customer withdrawals at Bear Stearns Cos. raised concern that other Wall Street firms may face cash shortages. Options trading signaled Lehman will keep dropping.

``Our liquidity position has been and continues to be very strong,'' New York-based Lehman said in an e-mailed statement.

The fourth-biggest U.S. securities firm declined 38 percent to $24.20 at 9:07 a.m. in New York. Lehman, the biggest underwriter of U.S. mortgage bonds, has dropped 40 percent this year through yesterday as the worst housing slump in at least a quarter century led to losses from mortgage securities. Bear Stearns, Lehman's biggest rival in mortgage bonds, agreed yesterday to be purchased by JPMorgan for about 93 percent less than its March 14 closing price.

``In light of what happened with Bear everything else is under pressure and everyone's looking to make sure they have the funding and liquidity,'' said Tim Smalls, head of U.S. trading at Execution LLC in Greenwich, Connecticut. ``We're seeing a classic case of selling first and asking questions later. Every global financial stock is getting whacked.''

Options trading, which presaged last week's biggest-ever share decline for Bear Stearns, shows that Lehman may also decline, derivatives strategists said.

Implied volatility, a measure of how much investors are paying to insure against further stock-price losses, for Bear Stearns more than doubled to a record 248.82 on March 14 after the fifth-biggest U.S. securities firm sought emergency funding to avoid collapse.

Seven-Year High

Implied volatility for Lehman nearly doubled to a seven-year high of 131.73. That's more than 50 percent higher than Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley.

``The options market is saying Lehman is next, that Lehman may have to follow Bear into the confessional before Good Friday,'' Michael McCarty, an options strategist at Meridian Equity Partners Inc. in New York, said during an interview with Bloomberg Television on March 14.

Lehman ``has high exposure to what could be the next group of high risk assets to be written down,'' according to Goldman derivatives strategists John Marshall and Stuart Kaiser.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

Last Updated: March 17, 2008 09:09 EDT