Wednesday May 7 2:23 PM EDT
US OPTIONS FOCUS/Takeover talk hits Lehman calls
CHICAGO, May 7 (Reuter) - Takeover speculation in Lehman Brothers Holdings Inc lured heavy call buying as investors
looked to take advantage of the stock's rally, traders said Wednesday.
In afternoon trading, Lehman stock was up 4-1/2 at 38-5/8 on turnover of more than 3.0 million shares. It reached a session
high of 38-7/8.
The New York Stock Exchange said the brokerage firm declined comment on its stock activity or the takeover rumors, citing
company policy.
"There is a lot of speculative buying of calls," said Andrew Schwarz, senior partner at AGS Specialist Partners in New York.
"There are rumors of a Chase bid."
Chase Manhattan Corp declined comment on the Lehman acquisition rumors.
By about 1330 CDT/1830 GMT, the Lehman May 40 calls traded a total of 4,670 contracts and the May 35 call traded
roughly 4,330.
The options trade on the American Stock Exchange and the Chicago Board Options Exchange.
"There were a lot of call buyers of the May 35s and now that the stock has moved up, they're buying the May 40 (calls)," said
Todd Raarup, a designated primary market maker for Kessler Asher at the Chicago Board Options Exchange.
"Some people were selling out the May 35s and then buying more May 40s," he said, noting that the May 35 calls were almost
twice as expensive as the May 40s.
Outside of the May series, the June 35 calls traded a total of 1,160 contracts, the June 40 calls traded 555, the July 35 calls
traded 1,120 and the July 40 calls traded around 1,985.
Traders said implied volatility in the Lehman options rose sharply as the stock moved higher.
Volatility in the May series rose through the 100 level in the 40 strikes and was up to the upper-80 to low-90 region in the 35s,
traders said.
In the June series, volatilities in the 35 and 40 strikes were trading in the 60 to 70 zone.
E-mail: derivatives @reuters.com |
