Good Evening WBM - would like your thoughts and those of edamo, Mark about this article I picked up - I mean obviously Dell got pinned to 40, but does this portend something that should be considered in the short term and what is your assessment of the situation.... Thank you....
Regards.....
Courtesy Belikemike of the TMF thread....
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Options Action May Push Dell
By Dan Colarusso
Senior Writer
03/18/99 01:42 PM ET
While index-option traders conduct their usual expiration
jockeying, there's one big-name stock experiencing pressure from
an enormous amount of options interest.
The name: Dell (DELL:Nasdaq). The problem: open interest. From
the Dell options crowd at the Philadelphia Stock Exchange, word
was that the big money players in the pits were responding to
options-trading patterns and trying to determine where the
boxmaker's shares may land. "The thing could get pinned at 40, or
the market could rise 200 and it could pop," said one floor trader.
"Either way, there's a lot of pressure coming from the open
interest."
Traders, in fact, are expecting a busy expiration for tech stocks
based on the historically high levels of recent action in the Nasdaq
100 futures. Other index action, traders said, was indicating a
slightly bullish tilt heading into the second half of trading today.
Back in downtown Manhattan, CIBC Oppenheimer senior options
strategist Michael Schwartz took a break from rehearsing for
tomorrow's mandatory triple-witching appearance on CNBC to
chat about Dell.
"If it goes down to the wire and positions are not rolled, the impact
may not be that great," he said. "But if the stock trades through
another stock price, sell orders coming from the exercise of the
options may materialize on Monday."
That could be key if enough of the call-buyers exercise and take on
the stock positions. Because Dell attracts so much retail investor
traffic, those call-buyers may not have the money to exercise, so
they may simply close out the positions. As a result, market
makers may end up buying back the contracts, exercising them
and selling the shares to offset other in-the-money positions.
"The option overhang could have an impact," said Tom Burnett, the
senior trading adviser at Wall St. Access. "But it could work both
ways. It's difficult to figure out where it will land."
Dell's March open interest was deepest in the March 45 and 50
calls, contracts quickly becoming quaint afterthoughts as the stock
bounced around 42 at midday. The March 45 calls have more than
62,000 contracts outstanding, and the March 50 open interest
stood at more than 55,000.
Their premium was rapidly eroding. "Those things are no
bid-a-teenie," the floor trader said, describing how much air had
come out of the prices.
Dell, which typically owns at least a few of the top-10 volume
spots, wasn't having a busy day today. There was some rolling
forward of March contracts into the April expiration month. The
March 45 calls traded almost 5,000 contracts by midday, but most
of that likely was players closing out positions or buyers taking
lottery-ticket chances on a pop in the stock on expiration Friday.
Action at the 40 strike price in the March options was a little
heavier because of the current in-the-money status of its options.
The March 40 calls traded almost 1,400 contracts from 2 1/16
($206.25) to 2 3/4 ($275). |
