|
Interesting strategy
US OPTIONS FOCUS/Big dividend plays in Morris, RJR
Reuters Story - December 10, 1997 18:46
%BEV %US %DRV %STX %INSI %.N/OPT MO CI RN %DPR CPQ V%REUTER P%RTR
CHICAGO, Dec 10 (Reuters) - Heavy volume in some Philip
Morris Cos Inc options Wednesday was from investors
using the options to capture the dividend, but this time
around, all the volume was not in in-the-money calls.
Typically, investors will buy in-the-money calls right
before a stock goes ex-dividend as a way to capture the payout,
but some investors in Philip Morris were using a combination of
stock and put options as well.
Philip Morris, which was up 1/8 at 44-11/16 on consolidated
volume of 6.3 million shares in afternoon trading, goes
ex-dividend Thursday.
"Besides doing spreads, it looks like they're buying stock
and buying puts," said Michael Schwartz, a managing director at
CIBC Oppenheimer.
He said it appeared investors were buying deep in-the-money
calls to exercise and convert into stock and that at least one
had bought December 55 puts in conjunction with the shares,
with both strategies used to capture the dividend.
The December 55 puts traded 38,000 contracts.
By holding the stock, the investor will receive the
dividend and by holding the puts, the investor will then be
able to sell the shares at a set price.
The December puts expire at the end of next week.
A similar dividend play was seen Tuesday in CIGNA Corp
, which went ex-dividend today.
"They're rolling, they're capturing, they're trying
everything," Schwartz said of the action in Philip Morris
options.
In addition to the December 55 puts, trading was heavy in
the December 35 calls, which traded mroe than 16,000 contracts,
the January 20 calls, which traded 11,120 and the January
33-3/8 calls, which traded 11,240.
Dividend plays were also evident in options on RJR Nabisco
Holdings Corp . The stock, which was unchanged at
36-13/16, also goes ex-dividend Thursday.
The dividend capture strategies in this option were more
traditional but were spread across the three options exchanges
that trade RJR options, Schwartz said.
The RJR December 30 call traded about 29,700 contracts,
with most of the volume crossing on the American Stock
Exchange. The options also trade on the Chicago Board Options
Exchange and the Philadelphia Stock Exchange.
The RJR December 27-1/2 call traded nearly 22,700.
In other options activity, Compaq Computer Corp
options were busy as the stock succumbed to the recent swoon in
the technology sector, losing 4-1/8 to 59-1/4.
At the Pacific Exchange, where Compaq options trade, pit
representative Mike Ditzler said investors were mainly buying
calls in the January series and that investors who had bought
puts recently were selling them.
He added that implied volatilities were up about six
points.
|
