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Top Stories: Options Buzz: Expiration-Related Activity Sparks IBM, Intel Volume
By Dan Colarusso
Staff Reporter
11/17/97 3:53 PM ET
Roll, baby, roll.
That's what options players are doing today. On a strong day in the equity markets, most options activity has been directed at rolling November's defensive positions into December as expiration looms on Friday.
"A lot of the volatility this week is going to be directed at the expiration," said CIBC Oppenheimer options strategist Michael Schwartz. "The pushing over of positions into the next expiration is still consistent with a bull market." Schwartz said he's expecting only one day of mild downside disturbance related to the expiration.
Volatility is remaining stubbornly high, with the Chicago Board Options Exchange Volatility Index (VIX) closing at 33 Friday. That high volatility, according to Bill Yates of DYR Associates, shows "institutions are willing to pay a higher price to get into the put market. It also tells you they're still long the stock."
Trading in Intel (INTC:Nasdaq) out-of-the-money November and December calls picked up today. Investors were likely rolling out of the November 85 and into the December 85 calls, where volume hit 4,151. Investors are counting on an Intel comeback and with shares slightly above 80 and already up close to 2 today, momentum seems positive. Similar activity was seen in Intel's November 75 and 80 puts as both of those strikes saw strong activity in both months.
In morning trading, IBM (IBM:NYSE) also saw some big rolling of positions. The November 90 calls recorded volume of 3,171, with much of that sliding into the December 90 calls, which accounted for volume of 3,229.
One earnings-related play caught the eye of options investors. Hewlett-Packard (HWP:NYSE), slated to report earnings after the close today, is seeing heavy out-of-the-money call trading. With its shares trading at 63 1/8, HP's November 65 calls traded 4,300 contracts, showing generally optimistic sentiment from investors.
In other options activity:
Exxon (XON:NYSE) calls options led trading on the Chicago Board Options Exchange through the early afternoon as investors took out-of-the-money positions at the December 65 strike. With problems in Iraq looming, the contract traded more than 4,700 contracts. Much of the Iraq crisis play was "discounted" in the markets last week, said Oppenheimer's Schwartz.
A Montgomery Securities research hit put a bit of a wrinkle in Immunex (IMNX:Nasdaq) options volume this morning. The San Francisco brokerage initiated coverage of Immunex with a sell recommendation, and options speculators were all over it. The company's November 65 puts traded more than 4,000 contracts in the morning, and the December 80 calls recorded volume of almost 3,000. The stock was trading down 1 1/2 to 68 5/8 at midday. <Picture>
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