If WFR 2001 LEAPs come, will they be worth the wait?
Visions of Zeev's "100 by 2001" target dancing in my head, I had been holding a small cash position with the intention of gambling on the Jan 2001 30 calls. But as I noted in exchange2000.com the CBOE says WFR doesn't meet their requirements for offering the 2001 LEAPs. Doug Stitch pointed out in exchange2000.com that neither does Borland, and BORL 2001 LEAPs appeared on schedule. So I thought I'd look into things a bit further to see if WFR might be in almost the same position as BORL, criteria-wise, and thus if the 2001 LEAPs might appear at some point in the near future.
The criteria were:
1) Underlying security price >= $20 (WFR 14+, BORL 9-, so WFR "wins" this round)
2) 250 contracts/day traded in the regular equity option. I looked at the CBOE site, and it shows several BORL options (up to Jan 99) that traded yesterday (Fri 5/22), with 452 Jul 10 calls (BLQGB) by far the most numerous. 102 of the Jan 2000 15 call LEAPs (LOBAC) also traded. Total open interest in call options (up to Jan 99) was over 20K.
If the CBOE site is to be believed, no WFR calls or LEAPs traded yesterday at all, and the total open interest in calls is just 1644.
3) Daily stock volume > 200K (NYSE) or 400K (NASDAQ). According to the volume chart for the past three months at Yahoo, WFR hasn't even reached 200K during that time. It's a little harder to judge Borland, but certainly they've been quite active recently. (Yesterday WFR's volume was 61K and BORL's was 1.6M.)
The other criteria are much more subjective or difficult to measure, but it looks to me that as long as WFR's stock and option volume is so small there's no chance at all of seeing any more LEAPs offered. And I'm assuming that if WFR does pick up, the attendant rise in price will negate a great deal of the potential appreciation. (I'd much rather have a bunch of Jan 2001 30 calls now than pay for them after the stock has moved to 27...) And even that assumes the CBOE can decide to offer the 2001s "off-schedule", rather than just waiting for May 1999 to offer the 2002s.
So I'm thinking I should just buy the stock and settle for a merely outstanding return (and use some of the cash for other things) instead of waiting further for the LEAPs and getting that new BMW. I welcome comments or other opinions.
(Already bought 5 of the Jan 2000 30s. At 7 1/2 (sigh)). |
