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: money on derivatives and only bought them to protect its planned purchases of VW stock. On October 29th it said that it would settle up to 5% of its VW options, freeing up a similar portion of stock and sending the price down again.

Hedge funds that take bad bets may garner little sympathy, but the VW saga does more than punish a few

“locusts”. On October 28th shares in Morgan Stanley, Goldman Sachs and Société Générale wobbled on worries (denied by all) that they might also be exposed to VW. If the losses are big enough to cause the failure of even a few hedge funds, that would spell more pain for the battered banking system. Other casualties include buyers of passive funds that track the German market who will end up with a disproportionate stake in VW within their portfolios. With VW’s share price falling again, those who sell now will lock in a loss.

The greatest damage is to the reputation of Germany’s capital markets, where regulators are now belatedly investigating what went on. Allowing acquirers to build large secret stakes in bid targets does nothing for confidence. Even Porsche may come to rue its coup. “They may struggle to sell 911s to hedge-fund managers for years and years to come,” says one investor.