Compaq Rumors Juice Traffic in Calls
By Erin Arvedlund
Staff Reporter
5/7/99 2:19 PM ET
Options floors typically buzz with Friday rumors, but today's chitchat surrounding Compaq (CPQ:NYSE) sounded a serious note, particularly the talk that a Dell (DELL:Nasdaq) corporate officer might jump over to fill the empty CEO hot seat at the headless box maker.
The Goldman Sachs options desk was apparently a large customer in June call options of Compaq on both Thursday and Friday, according to specialists and traders. Buying in the options has been brisk, they said.
Volatility Index
Today % Change
29.39 -6.42
Source: ILX
"Is it out of boredom that the market's created this rumor about Compaq? Maybe, but there have been some giant options trades, to the tune of about 14,000 contracts," said one floor broker.
Compaq Chairman Benjamin Rosen has won repeated praise from shareholders for engineering the ouster of Compaq Chief Executive Eckhard Pfeiffer last month.
However, "the crux of the rumor probably is that the Street is growing impatient with Compaq, the company needs a CEO and the speculation is that one of Dell's COO's in charge of online corporate sales would go to Compaq," said the trader. "It would make sense. Compaq needs guidance in the online area."
Premium on Compaq's May 25 calls, however, was down 3/16 ($18.75) to 15/16 ($93.75) on volume of 4,700 contracts, compared with open interest of 32,000. The June 25 calls slipped 1/16 ($6.25) to 1 15/16 ($193.75) on volume of 2,856, compared with open interest of 26,728 contracts.
Put/Call Ratio
Today (Noon) Previous Close
.42 .35
Source: ILX
"There has been an increase in order flow the past two days, and orders focused in on June 25 calls," said a Compaq specialist with one of the major exchanges. He also pointed out that the volatility in those calls spiked to around 60 on Friday, compared with roughly 50 earlier in the week. (Volatility very often rises in anticipation of news regarding the stock or the company.)
Calls to Compaq and Dell officials for comment weren't immediately returned.
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