U.S. OPTIONS/Peoplesoft vols jump amid bid talk
CHICAGO, Jan 7 (Reuters) - Implied volatility on Peoplesoft Inc. (Nasdaq:PSFT - news)
options surged on Thursday afternoon amid rumors that the computer software group was the
subject of a takeover.
An old rumor that International Business Machines Corp. (NYSE:IBM - news) would launch a
bid for Peoplesoft reemerged this afternoon, sparking a flurry of activity in both the stock and the options.
Both companies declined to comment.
The speculation was met with some skepticism among analysts and traders, yet implied volatility, a key factor in
determining options prices, traded as high as 115 percent for the January 25 contracts. It ended around 105 percent.
''Vols spiked.... They're well above last month's range between about 69 and 81 percent, and volume is higher too,'' said
Paul Foster, investment strategist and editor of 1010WallStreet.com.
''But I'm not a believer that (IBM chief executive) Lou Gerstner wants to buy a company like this. The stock has been
beaten up and the options were cheap, so a lot of people took a cheap shot,'' Foster said.
A market maker on the Pacific Exchange echoed that view, adding that trading patterns in puts and calls did not seem
indicative of an impending takeover.
''I just don't believe it, but that's what everyone is talking about,'' the market maker said.
Peoplesoft stock ended 2-3/4 higher at 24-7/16.
Elsewhere, implied volatility on Fruit of the Loom (NYSE:FTL - news) options spiked above the 100 percent mark in
brisk trading, traders said.
An options analyst noted that trading volume was heavy in both the January and February contract months, with higher
implied volatility levels, suggesting that traders believed a deal was in the wings.
No one at Chicago-based Fruit of the Loom was immediately available to comment on the speculation.
The stock rose 7/16 to 17-7/16.
Options on Mellon Bank Corp. (NYSE:MEL - news) also drew strong interest, with volatility creeping higher.
Traders noted that volume in Mellon options has been rising in recent sessions.
''It looks like something may be up, but I don't know what,'' a trader said. |
