Options Report: Waiting for IBM Earns; Chasing Pfizer
April 20, 1998 2:32 PM
By Steven M. Sears
NEW YORK (Dow Jones)--International Business
Machines' options are trading in an air of uncertainty in
advance of the technology company's after-market
earnings report.
Traders expect the company will beat the consensus
first-quarter earnings number of $1.05 a share, but they
are nervous about what happens after that.
The stock has made a good run in the past three weeks
and is now about 3 1/2 points off its high of 113 1/2.
The uncertainty comes from trying to anticipate if
earnings will drive the stock higher or instigate profit
taking.
Some traders are buying out-of-the money calls to
position themselves for a drive back into record
territory. Other traders are buying puts to either protect
their stock or to make a buck if the stock price goes
down.
"People are putting some bets down," an IBM options
trader at the Chicago Board Options Exchange said.
"What I'm hearing is that they are looking for earnings to
be somewhat higher, maybe not significantly higher. But
people are looking at the action of the stock over the
past three weeks."
The most active calls include the May 110 and 115
contracts which have traded 6,218 and 6,608 contracts,
respectively. The most active puts include the May 100,
105 and 110 puts, which have traded 2,899, 3,763 and
3,250 contracts, respectively. IBM's options are the
second most actively traded contracts in the market.
Almost 36,000 contracts have traded. The stock is up 2
1/8 at 109 7/8.
The most actively traded options are Pfizer's.
Pfizer's impotence drug is turning the pharmaceutical
company's options into go-go contracts. Institutional
traders sold the contracts Friday because they thought
the stock's 4 1/2 point gain that session was the final
expression of a price surge.
"They thought that was the move," a Pfizer options
trader said.
But Monday, traders and a horde of retail traders are
buying into the stock's 6 3/4 point gain that has Pfizer
trading at 112 3/8 on heavy volume. Some traders are
covering positions, too. The stock is trading at 111
15/16, off slighlty from its intraday high of 112 5/16.
Trading is being driven by media coverage of Viagra.
The Wall Street Journal reported Monday that Viagra is
one of the fastest-selling drugs in the history of medicine.
The article cited market sources said doctors are writing
tens of thousands of prescriptions each day.
So far, more than 41,000 Pfizer options have traded,
compared with almost 61,000 contracts Friday, most of
which were on the sell-side.
The size of the average trade Monday is 20 contracts,
the Pfizer trader said. Trades for less than 100 contracts
generally indicate retail traders.
Active Pfizer calls include the May 105, 110 and 115
calls, which have traded 4,169, 4,517 and 2,023
contracts, respectively.
-Steven M. Sears; 201-938-5355 |
