Compaq Rumors Juice Traffic in
Calls
By Erin Arvedlund
Staff Reporter
5/7/99 2:19 PM ET
Options floors typically buzz with Friday rumors,
but today's chitchat surrounding Compaq
(CPQ:NYSE) sounded a serious note, particularly
the talk that a Dell (DELL:Nasdaq) corporate
officer might jump over to fill the empty CEO hot
seat at the headless box maker.
The Goldman Sachs options desk was apparently
a large customer in June call options of Compaq
on both Thursday and Friday, according to
specialists and traders. Buying in the options has
been brisk, they said.
"Is it out of
boredom that the
market's created
this rumor about
Compaq? Maybe,
but there have been
some giant options trades, to the tune of about
14,000 contracts," said one floor broker.
Compaq Chairman Benjamin Rosen has won
repeated praise from shareholders for engineering
the ouster of Compaq Chief Executive Eckhard
Pfeiffer last month.
However, "the crux of the rumor probably is that
the Street is growing impatient with Compaq, the
company needs a CEO and the speculation is that
one of Dell's COO's in charge of online corporate
sales would go to Compaq," said the trader. "It
would make sense. Compaq needs guidance in
the online area."
Premium on Compaq's May 25 calls, however,
was down 3/16 ($18.75) to 15/16 ($93.75) on
volume of 4,700 contracts, compared with open
interest of 32,000. The June 25 calls slipped 1/16
($6.25) to 1 15/16 ($193.75) on volume of 2,856,
compared with open interest of 26,728 contracts.
"There has been an
increase in order
flow the past two
days, and orders
focused in on June
25 calls," said a
Compaq specialist
with one of the major exchanges. He also pointed
out that the volatility in those calls spiked to around
60 on Friday, compared with roughly 50 earlier in
the week. (Volatility very often rises in anticipation
of news regarding the stock or the company.)
Calls to Compaq and Dell officials for comment
weren't immediately returned. |
