CHICAGO, Dec 18 (Reuter) - Options on shares of Worldcom Inc were active for a third
consecutive session Wednesday, and some traders linked the action to increased speculation the
telecommunications company would be bought.
"There's no news that we know of, but it definitely smells like something's going on," one trader at
the Pacific Stock Exchange said.
He said some of the action could be linked to the closing of WorldCom's merger deal with MFS
Communication Co Inc later this week, but added that MFS options were not very active.
"Standard procedure would be to buy MFS options and sell WorldCom," he said. "It could be
that somebody is going to say something about WorldCom before the merger is concluded."
Data from Lawrence McMillan, who runs McMillan Analysis Corp and publishes The Options
Strategist, showed that WorldCom options volume on Monday rose to more than 12,000
contracts compared to average volume of about 2,600.
On Tuesday, turnover reached about 43,250 and the increases were all on the call side.
"Yesterday a customer bought and sold roughly 16,000 of the Jan 22-1/2s and 25s," the trader
said.
option was the January 30 call, which traded more than 1,200 contracts.
The January 27-1/2 call traded 865 and the January 25 call traded about 600.
The biggest volume was the 10,000 contracts in the January 1998 25 calls.
The trader said a customer bought those options.
On the put side, trading was thin, with the December 25 and January 25 trading 20 contracts each.
The stock was up 1/8 at 23-5/8 on modest turnover of roughly 2.2 million shares.
McMillan said WorldCom has long been a subject of takeover talk, particularly as the
telecommunications industry continues to consolidate.
In early November, after the merger of MCI Communications Corp and British
Telecommunications Plc BT.L rocked the industry, one analyst said WorldCom was "definitely" on
the selling block.
He cited GTE Corp , Bell Atlantic Corp or Britain's Cable and Wireless Plc CW.L as possible
buyers.
"It looks like a takeover," one trader said of the WorldCom options activity.
He noted that volatilities in the options have increased sharply over the last week.
Volatility in the out-of-the-money January calls was in the 60 region, up from around 30.
((--Gregory Crawford, 312 408 8750))
((E-mail: derivatives @reuters.com)) |
