U.S. OPTIONS/Cisco vols creep higher ahead of Q3
May 4, 1998 06:22 PM
CHICAGO, May 4 (Reuters) - Implied volatility on Cisco Systems Inc. CSCO crept higher on Monday as traders awaited the group's fiscal third quarter results, due on Tuesday.
Implied volatility for nearby at-the-money options rose to around 42 percent from 38 percent on Friday, dealers said.
"I'm surprised it hasn't risen more. Usually it would be around 60 percent one day before earnings," one trader said.
"The market is saying that they think (Cisco) will hit their numbers," he added.
Michael Schwartz, a managing director at CIBC Oppenheimer, said some players appeared to be rolling out of May 40 calls and into June 40 calls. "And it looks like some covered writers were raising their strikes," he added.
Overall, he said, there seemed to be some speculation that the report would exceed expectations.
The consensus estimate of a survey of 32 brokers taken by First Call was $0.44 per share, up from $0.35 a year ago.
"There's very little fear that the stock is going to fall on these (earnings) figures," another trader said.
The stock closed 1-5/16 higher at 74-15/16, after scoring a record high at 75-13/16 earlier.
Elsewhere, calls on Compaq Computer Corp. CPQ were among the most actively traded options at the Pacific Exchange after the underlying stock recaptured the 30 level, traders said.
"That was bullish technically and drew in some buyers of calls," an options analyst said.
The stock rose 13/16 on the New York Stock Exchange to 30-3/16, the highest level in two months.
Dealers also noted heavy call buying in Oracle Corp. ORCL . "This is the third (business) day in a row we've seen so much call buying," a floor broker said.
"We're seeing interest from retail customers and institutions. We're getting everything from a 10-lot to a 200-lot and up," he said.
He added the belief was that Oracle stock, which has been depressed in recent weeks, would soon rebound and start trading like the Internet stocks.
((Debra Sherman, Chicago Derivatives Desk 312-408-8750, chicago.derivatives.newsroom@reuters.com))
REUTERS
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